Key Takeaways
Nearly a quarter of economists say the Federal Reserve should cut interest rates when it meets later this month, according to a recent survey. Most economists still expect the Fed to wait until September to cut the federal funds rate, and financial market participants share that view. Federal Reserve officials have said they need more data to show inflation is under control before they start cutting the central bank's benchmark interest rate, which is at a 23-year high.
For some economists, July is the new September.
That means some economists believe the Federal Reserve should start cutting interest rates at its next meeting later this month. These economists argue that recent economic data provides ample evidence that inflation is declining toward the central bank's 2% annual target. In a recent Wall Street Journal survey of economists, 24.6% expressed that view.
“If the need to cut rates is so clear, why wait another seven weeks to do so?” Goldman Sachs chief economist Jan Hatzius said in a separate commentary this week.
But only a small percentage of economists believe a cut will come this month. 98.5% of economists surveyed by The Wall Street Journal say the Fed will make its first rate cut after its July meeting. A majority of economists believe the central bank will cut rates in September, and financial market participants share the same view.
Basis for July cuts
The Federal Reserve has kept its key interest rate at a 23-year high for the past 12 months, pressuring consumers and businesses as part of an effort to cool the economy and tame inflation, which has been trending downward since peaking in June 2022, though progress slowed somewhat last year.
But Hatzius argues that recent economic data points to rising unemployment and possible slowing GDP growth, which could become a problem if the Fed lets things go for too long.
Meanwhile, the central bank is keeping a close eye on these factors, and in recent weeks, policy committee members, including Chairman Jerome Powell, have said they are keeping a close eye on the labor market to avoid an unwanted spike in the unemployment rate that could signal a recession.