Why Some Economists Think the Fed Should Cut Interest Rates This Month

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Key Takeaways

• Nearly a quarter of economists say the Federal Reserve should cut interest rates at its union at the end of this month, according to a recent survey.
• Most economists still forecast the Fed will wait until September to cut its significant fed funds rate, a view that’s also held by financial market participants.
• Fed officials have said they demand to see more data that indicates inflation is under control before starting to cut the central bank’s benchmark predisposed rate, which is at a 23-year high.

For some economists, July is the new September.

That is, some economists believe the Federal Spare should begin cutting interest rates at its next meeting at the end of the month. These economists argue recent mercantile data is enough evidence that inflation is falling toward the central bank’s annual goal of 2%. In a fresh Wall Street Journal survey of economists, 24.6% held that view.

“If the case for a cut is clear, why wait another seven weeks earlier delivering it?” wrote Goldman Sachs Chief Economist Jan Hatzius in a separate commentary this week.

However, no greater than a slim percentage of economists believe a cut is likely to happen this month: 98.5% of economists surveyed by The Journal verbalized the Fed will make its first interest rate cut sometime after the July meeting. The majority of economists believe primary bankers will cut in September, a view that’s also held by financial market participants.

Making the Case for a July Cut

The Federal Evasion has held its key interest rate at a 23-year-high for the past 12 months, putting pressure on consumers and businesses, as part of an pains to cool the economy and tame inflation. Inflation trended downward since hitting its peak in June 2022, but increase has faltered some in the last year.

However, Hatzius argues, recent economic data has pointed to higher unemployment and potentially slower GDP extension, which could become an issue if the Fed lets it go unchecked for too long.

Central bankers, for their part, are keeping an eye on these deputies. In fact, in recent weeks, members of the policy-making committee, including Chair Jerome Powell, have said they are carry on a close eye on the labor market to avoid unwanted spikes in unemployment that could signal a recession.

Read the fresh article on Investopedia.