Interest rate cut planned? Timing of new opinion poll project

The Federal Reserve plans to cut interest rates twice this year, with the first likely not until September, according to a Reuters survey of economists.

A poll conducted from May 31 to June 5 found that 74 out of 116 economists, or about 64%, believe the first cut in the federal funds rate will be by 25 basis points in September.

About 60%, or 68 out of 116, said they expected two interest rate cuts in 2024. These results are all similar to the results of a Reuters poll conducted last month.

But few economists now expect the Fed to take action at its July meeting. In a May poll, 11 out of 116 economists expected the first interest rate cut to occur in July. The new survey found that only five economists, or about 4%, called for the first cut in July.

Not a single respondent thought the next rate cut would come at next week’s meeting on June 11-12.

I need good data

This won’t come as a surprise to most investors, even though the Fed’s “dotplot,” or outlook summary, in March suggested there would be three rate cuts. Of course, that was before the inflation rate rose in March.

Based on statements from Fed officials over the past two months, it seems clear that the Fed will not take action until the inflation rate is lowered toward its 2% target. Most recently, Federal Reserve President Christopher Waller said he would need to see several months of good inflation data before taking action.

“The economy now appears to be getting closer to where the committee expected,” Waller said on May 21. “Nonetheless, in the absence of significant weakening in the labor market, I should expect to see good inflation data for a few more months. From a monetary policy standpoint, it would be comfortable to support easing. What does good data mean? What level do I need to provide future inflation reports? “I’ll keep that to myself for now, but let’s say I look forward to the day when I don’t have to go to two or three decimal places in monthly inflation data to find good news.”

The next dot plot is coming soon

The Federal Reserve is scheduled to release its next dot plot forecast at the end of this month. Based on recent commentary, I would be surprised if the Federal Open Market Committee’s (FOMC) consensus does not call for just two rate cuts or less this year.

Going back to the Reuters poll, about 28% of economists (33 out of 116) said they expected just one interest rate cut in 2024. Additionally, only 13% (15 out of 116) expected two or more interest rate cuts this year.