60% of US Economists Say No Interest Rate Cut This Year

Possibility of Economic Recession in Q3
Next Year's Growth Rate Also Forecasted at 1.6%

Six out of ten American economists predicted that the U.S. Federal Reserve (Fed) would not cut interest rates within this year.

The Wall Street Journal (WSJ) reported on the 15th (local time) that in a survey conducted from the 7th to the 11th among 62 economists, only 39% of respondents expected the Fed to lower the benchmark interest rate within this year.

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The majority of the remaining respondents anticipated no rate cuts before 2024.

Compared to the January survey, where slightly more than half expected a rate cut within the year, experts' interest rate outlook has shifted somewhat hawkishly (favoring monetary tightening).

The change in experts' views is due to the possibility that inflation may persist longer than initially expected.

In the April survey, respondents forecasted the consumer price index (CPI) inflation rate at 3.53% (year-over-year) by the end of this year. This is a noticeably higher projection than the January survey result of 3.1%.

Experts predicted that the Fed's benchmark interest rate, currently at 4.9% (4.75?5.0%), would rise to 5.125% (5.0?5.25%) by the end of June. This suggests the Fed is expected to raise rates once more in May or June.

The probability of a recession occurring within the next 12 months was forecasted at 61%, the same as in the January survey.

Experts anticipated that the recession would likely begin around the third quarter of this year and be mild and short-lived.

The banking crisis triggered by the collapse of Silicon Valley Bank (SVB) last month was not expected to exacerbate recession risks.

Fifty-eight percent of respondents judged that the crisis was largely avoided, while only 42% expected additional problems to arise.

Joe Brusuelas, chief economist at consulting firm RSM, said, "Unless additional financial stress arises from problems at small- and medium-sized banks, I do not expect a rate cut in 2023."

According to this survey, the U.S. gross domestic product (GDP) is expected to grow by only 0.6% year-over-year in the fourth quarter of this year, and the growth rate for next year is projected to be just 1.6%.

The percentage of respondents who believe the U.S. economy will not achieve a soft landing rose slightly to 76%, compared to 75% in the January survey, and the current unemployment rate of 3.5% is expected to rise to 4.3% by the end of this year.

Experts forecast that over the next four quarters, U.S. jobs will increase by only 12,000 per month on average, and that job losses may occur from the third quarter of this year through the first quarter of next year.