Two out of Three Economists Say "US to Cut Interest Rates for the First Time in September"

60% "Interest Rates to Be Cut Twice This Year"

Amid robust US inflation indicators, economists are increasingly optimistic that the Federal Reserve (Fed) may initiate its first interest rate cut in September. Many also believe that there could be two rate cuts this year.

According to a survey of major foreign media on the 13th (local time), 70 out of 108 economists expected the Fed to make its first rate cut in September. The survey was conducted from the 5th to the day of the report.

[Image source=Reuters Yonhap News]

In last month's survey, just over half anticipated a cut in September, indicating that expectations for a September rate cut have strengthened over the past month.

Chris Low, Chief Economist at FHN Financial, expects the Fed to cut rates twice this year, in September and November. He said, "We have not heard any good news on inflation during the first quarter," adding, "The Fed needs to show a trend change to cut rates. The possibility of more than two cuts is also quite high."

The Consumer Price Index (CPI) for April is scheduled to be released on the 15th. The market expects the April CPI to rise 0.4% month-over-month and 3.4% year-over-year. The CPI for January through March all exceeded market expectations. However, if the CPI again surpasses expectations, the outlook for rate cuts could retreat.

Among the 108 economists who responded to this survey, 65 expected two rate cuts this year. However, only 17 respondents anticipated more than two cuts, down by half from 34 last month. Twenty-five believe the Fed will cut rates only once.

Wells Fargo economists see a low likelihood that the rate cut cycle will be delayed until November, stating, "The risk is greater if there is only one cut this year rather than three."

Regarding the view that the Fed will maintain rates without cutting this year, 26 out of 41 respondents said the possibility is low or very low.

Meanwhile, Fed Vice Chair Philip Jefferson said on the same day, "The slowdown in inflation reduction in the first quarter is a source of concern," adding, "I think it is appropriate to maintain rates at a restrictive level."