Friday, July 12, 2024

A poll recently released by Reuters has disclosed that the prevailing opinion among economists is that the U.S. Federal Reserve has probably put a ceiling on its interest rate hikes for the time being. However, any reductions in rates are not forecasted to occur until March of the following year. This information emerges as the markets are gearing up for the yearly Jackson Hole Economic Symposium, which is due to commence next week. The financial community’s attention is focused on Federal Reserve chairman Jerome Powell, with investors awaiting his statement with bated breath.

Projections Suggest No Interest Rate Reductions in 2023; Statements from Powell at Jackson Hole May Alter Expectations

After the latest increase in the federal funds rate (FFR), it appears that the U.S. central banking system is applying the brakes. This view is shared by an overwhelming majority of economists who participated in the Reuters survey. Out of 110 economists surveyed, an astonishing 90% – 99 individuals – foresee that the rate will stay the same this coming September at the impending Federal Open Market Committee (FOMC) meeting. Additionally, around 80% are of the opinion that no further increases in rates will happen throughout the year.

CME Group’s Fedwatch Tool reflects the market’s expectation that a hike in the rate this September is improbable, showing roughly an 89% chance of no alterations at the September 22 FOMC assembly and an 11% probability of a 25 basis point increase. Of those who were surveyed, 23 predict one more hike within this year, while two economists believe the FFR will climb twice more. Almost exactly half, specifically 48 out of 95, think that the Fed will sustain the current rates until the close of March.

The prevailing forecasts for the current FFR, as shown by CME Group’s Fedwatch Tool on August 20, 2023.

A pair of financial forecasters are speculating that a reduction in rates might transpire by the end of the last quarter of 2023. Goldman Sachs’ top U.S. economist, David Mericle, explained to Reuters, “We have long held that the barrier to reductions is high because Fed authorities would want to reduce the chance that they might later regret a cut if inflation continues to hover at elevated levels.” However, these predictions could take a turn after Jerome Powell, the Fed chair, gives his speech at the Jackson Hole Economic Symposium on August 25. Investors are keenly looking forward to Powell’s insights on the policy direction for the closure of the year.

CME Group’s Fedwatch Tool further illustrates the market’s current mindset: a rate hike in September appears to be off the table, with an 89% likelihood that the Federal Open Market Committee (FOMC) will maintain the status quo on September 22, and only an 11% chance of a 25 basis point climb. Among the respondents, 23 forecast a single rate hike this year, while two economists anticipate the FFR rising twice. Nearly half of the group, exactly 48 out of 95, anticipate that the Federal Reserve will refrain from modifying rates until the conclusion of March.

A couple of financial prognosticators are betting on a rate reduction by the close of 2023. David Mericle of Goldman Sachs told Reuters, “We have long perceived a significant hurdle to cutting because Federal officials will aim to minimize the potential regret that might arise if they cut and inflation remains stubbornly high.” However, the forecast landscape may shift following the remarks of Federal Reserve Chair Jerome Powell at the Jackson Hole Economic Symposium on August 25. Investors are anxiously awaiting Powell’s guidance regarding the policy roadmap for the end of the year.

What’s your opinion on the Federal Reserve’s likely actions for the rest of 2023? Do you foresee a prolonged standstill? Are rate cuts in the cards? We invite you to share your thoughts and viewpoints on this topic in the comments section below.

Frequently Asked Questions (FAQs) about fokus keyword: Federal Reserve rate

What do the majority of economists predict regarding the Federal Reserve’s interest rates for 2023?

Most economists predict that the U.S. Federal Reserve has probably put a ceiling on its interest rate hikes for 2023. They expect the rate to remain unchanged with no additional hikes for the rest of the year. Rate cuts are not anticipated until March 2024.

Who provided the insight into the market’s expectation for a rate hike in September?

CME Group’s Fedwatch Tool provides insight into the market’s expectation, reflecting roughly an 89% chance of no alterations in the rate at the September 22 FOMC assembly, and an 11% probability of a 25 basis point increase.

What are investors particularly anticipating from Fed Chairman Jerome Powell?

Investors are eagerly awaiting remarks from Federal Reserve Chairman Jerome Powell, especially his speech at the Jackson Hole Economic Symposium on August 25. They are keen to hear his insights on the policy direction for the end of the year.

Are there any predictions for a rate cut before the end of 2023?

Yes, two financial forecasters are speculating that a reduction in rates might occur by the end of the last quarter of 2023. However, most economists believe that cuts are unlikely until March 2024.

How many economists were surveyed in the Reuters poll, and what was the general consensus?

110 economists were surveyed in the Reuters poll. An astonishing 90% of them foresee that the rate will stay the same in the upcoming September FOMC meeting, and around 80% believe that no further increases in rates will happen throughout the year.

What is the significance of the Jackson Hole Economic Symposium in this context?

The Jackson Hole Economic Symposium is a significant event in the financial calendar where policy directions and economic issues are discussed. Jerome Powell’s upcoming speech at this event is highly anticipated, as it may provide insights into the Federal Reserve’s policy trajectory for the year’s end.

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5 comments

JamesT82 August 21, 2023 - 1:13 pm

I can’t believe the fed’s not gonna raise rates this year. inflation’s a big problem, where’s the sense in this?

Reply
JennyHills August 21, 2023 - 5:08 pm

Why wait till 2024 for rate cuts. Doesn’t make sense to me, but then again I’m not an economist lol. What’s every1 else think??

Reply
Mike_in_Finance August 21, 2023 - 6:03 pm

CME Group’s tool seems pretty reliable. But who knows, 11% chance for a hike might turn into reality. Economics is a crazy game friends.

Reply
Sara_Lou August 21, 2023 - 10:08 pm

Jerome Powel’s remarks could really shake things up, right? I’m keping my eyes on that. stocks could go crazy.

Reply
GregWallStreet August 22, 2023 - 8:13 am

Jackson Hole Symposium is always a big deal, lots of changes could come from there. My advice dont make any big moves until after Powel talks!

Reply

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