As Federal Reserve Chair Jerome Powell prepares to speak on Monday, concerns are mounting among economists regarding the potential for a policy misstep by the US central bank in its ongoing fight against inflation.
A recent survey conducted by the National Association for Business Economics reveals that 39% of 32 professional forecasters believe a “monetary policy mistake” poses the greatest downside risk to the US economy in the coming year.
The survey, released on Sunday, indicates that 23% of respondents view the outcome of the upcoming US presidential election on November 5 as the primary risk, while an equal percentage points to the escalating conflicts in Ukraine and the Middle East as significant threats.
The focus on the Federal Reserve is heightened as it attempts to manage monetary policy carefully, aiming to bring inflation back to its 2% target while preventing a substantial rise in the unemployment rate, which has been gradually increasing for the past year. Powell is scheduled to address the association at 12:55 p.m. CDT (1755 GMT) in Nashville, Tennessee, where he is expected to discuss the Fed’s recent decision to cut its benchmark interest rate by half a percentage point during its September 17-18 meeting. This cut is part of an anticipated series of rate reductions throughout the remainder of this year and into 2025.
Economists foresee a slowdown in US economic growth, projecting it to decline to 1.8% next year from an estimated 2.6% this year. Additionally, they predict that the unemployment rate will rise to 4.4%, up from the current 4.2%, while inflation is expected to stabilize at around 2.1%.
In terms of the Fed’s future actions, expectations are for another interest rate cut at the upcoming November 6-7 policy meeting, with opinions divided on whether it will be by a quarter or half of a percentage point. The survey highlights that overall risks to the economy are increasing, with 55% of economists believing that the economy is more likely to underperform rather than exceed expectations.
Market Watch, Investing.com, Mint, and the Street contributed to this report.
