In Reuters Survey,
80% of Experts Expect a 0.25 Percentage Point Rate Cut
Job Growth Expected to Remain Steady After Shutdown
Eight out of ten economists expect the U.S. central bank, the Federal Reserve (Fed), to lower its benchmark interest rate by 0.25 percentage points next month.
Reuters reported on the 12th (local time) that, according to its own survey, 84 out of 105 economists (80%) predicted that the Fed would once again cut the benchmark rate by 25 basis points (1bp = 0.01 percentage point). This figure (80%) represents a slight increase compared to last month's Reuters survey.
On the other hand, 21 economists (20%) forecast that the rate would remain unchanged.
While members of the Federal Open Market Committee (FOMC), which determines the benchmark interest rate, are divided over whether to implement additional rate cuts within the year, the majority of economists are predicting another rate cut next month.
Previously, at the October FOMC meeting, a 0.25 percentage point rate cut was implemented amid unusual disagreement among committee members.
Although many in the market anticipated a rate cut at the December meeting, Fed Chair Jerome Powell emphasized at a press conference late last month that a December rate cut was not a foregone conclusion.
Abigail Watt, U.S. economist at UBS, said, "The general sense is that the labor market still appears relatively weak, and that is one of the main reasons why the Fed is still expected to cut rates in December," adding, "The potential risk in December will be data that dispels the sense of weakness."
She also noted, "There are already differing views on how much concerns about the labor market outweigh inflationary factors."
Half of the respondents said they expect the benchmark interest rate to be further reduced to between 3.25% and 3.50% in the first quarter of next year. This is also the median response among the economists, representing a level 0.5 percentage points lower than the current rate.
In response to another question, 36 out of 52 respondents (69.2%) said that job growth would have remained largely steady even after the U.S. federal government's shutdown (temporary suspension of government work).
While the market expected that the release of economic statistics, including employment data, would resolve the lack of visibility in the economy once the U.S. federal government shutdown ended, the White House indicated that this might not be the case.
White House spokesperson Karoline Leavitt said, "There is a high possibility that the October Consumer Price Index (CPI) and the nonfarm payrolls report may never be released."
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