Consensus Pause: Majority of Economists Predict No Rate Hikes for 2023, With Cuts Delayed Until March 2024

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A newly published Reuters poll reveals that most economists concur: the U.S. Federal Reserve has likely capped its rate hikes. Yet, rate cuts aren’t anticipated until March 2024. This survey drops just as markets approach the annual Jackson Hole Economic Symposium scheduled for next week. All eyes are on Fed chairman Jerome Powell, as investors eagerly await his remarks.

Market Forecasts No Rate Cuts Through 2023; Powell’s Jackson Hole Remarks Could Shift Outlook

Following the recent uptick in the federal funds rate (FFR), the U.S. central bank is seemingly hitting the brakes. This sentiment is echoed by the lion’s share of economists surveyed by Reuters. Of the 110 economists polled, a staggering 90% – 99 of them – predict the rate will remain unchanged this September at the forthcoming Federal Open Market Committee (FOMC) meeting. Furthermore, about 80% opine that we won’t see any additional rate hikes for the remainder of the year.

CME Group’s Fedwatch Tool shows that the market is pricing in the belief that there will be no rate hike this September. There’s roughly an 89% probability of no changes at the September 22 FOMC gathering and an 11% chance that there will be a 25 basis point rise. Out of the polled participants, 23 anticipate one more rate hike this year, while a pair of economists foresee the FFR jumping twice more. Approximately, 48 out of 95, predict the Fed will maintain rates till the end of March.

Two economists bet a rate cut could take place by the end of 2023’s final quarter. “We have long seen a high threshold for cutting because Fed officials will want to minimize the risk they could regret cutting if inflation stays too high,” David Mericle, the chief U.S. economist at Goldman Sachs told Reuters. Predictions may change, however, after Fed chair Jerome Powell speaks at the Jackson Hole Economic Symposium on August 25. Investors are hoping Powell will shed light on policy for the end of the year.

CME Group’s Fedwatch Tool paints a clear market sentiment: a rate hike this September seems unlikely. The odds? An 89% likelihood that the Federal Open Market Committee (FOMC) will stand pat on September 22 and a slim 11% possibility of a 25 basis point ascent. Among those surveyed, 23 of them forecast a solitary rate increase this year, while two economists envision the FFR surging twice. Of the lot, nearly half, precisely 48 out of 95, believe the Fed will stay its hand on rate changes until March’s end.

Two financial seers are wagering on a rate decrease by the curtain fall of 2023. Goldman Sachs’ chief U.S. economist, David Mericle, conveyed to Reuters, “We have long seen a high threshold for cutting because Fed officials will want to minimize the risk they could regret cutting if inflation stays too high.” Yet, predictions might pivot post Fed chair Jerome Powell’s discourse at the Jackson Hole Economic Symposium on August 25. Investors are on edge, eager for Powell to illuminate the policy trajectory for the year’s end.

What do you think the Fed will do for the remainder of 2023? Do you expect a long pause? Do you expect rate cuts? Share your thoughts and opinions about this subject in the comments section below.