6 out of 10 US Economists Say Fed Will Begin Rate Cuts in September

WSJ Economist Survey

Six out of ten American economists expect the U.S. Federal Reserve (Fed) to cut interest rates in September.

According to the Wall Street Journal (WSJ) on the 18th (local time), a survey conducted from the 5th to the 9th among 68 economists found that 64.2% of respondents believed the Fed would lower interest rates at the upcoming Federal Open Market Committee (FOMC) meeting in September.

Next, 14.9% of respondents expected a rate cut at the November FOMC, followed by 13.4% in December, and 6% after 2025. Only 1.5% anticipated a rate cut at this month’s FOMC meeting.

Regarding the appropriate timing for a rate cut, 45.6% of respondents chose September as the most suitable month. This was followed by 24.6% who said July was appropriate, and 12.3% who selected November.

Joe Brusuelas, an economist at RSM in the U.S., stated, "U.S. growth, inflation, and employment are all cooling at a more sustainable pace," adding, "This likely prepares the Fed to implement a restrained rate cut in the second half of this year."

However, the presidential election was seen as a potential variable for future benchmark interest rates. As previously reported by WSJ, more than half of the economists surveyed expected inflation and interest rates to rise if former President Donald Trump wins the November election.

Among respondents, 59.2% believed interest rates would be higher if former President Trump won. In contrast, only 16.3% thought rates would be higher if President Joe Biden were re-elected.

Inflation was cited as the cause. 56% of respondents expected inflation to rise during a Trump administration, while only 16% anticipated price increases under a Biden administration. Economists believe that if 'the tariff man' former President Trump returns to office, inflation will rebound due to rising import prices.

Regarding the federal government’s fiscal deficit, 51% of respondents expected it to increase more if former President Trump were elected, whereas only 22.4% thought the deficit would grow more if President Biden won.

Diane Swonk, an economist at KPMG, diagnosed, "As uncertainty surrounding the election results intensifies, the gentle path of rate cuts and delayed investments increase downside risks," adding, "Policy uncertainty acts like a tax on the economy."