Economists expect the Federal Reserve to delay any interest rate cuts until September amid concerns over a potential stagflation scenario in the US.
According to a Bloomberg survey of economists, the Fed is likely to keep rates steady in the near term due to uncertainty surrounding Donald Trump’s tariffs before implementing two rate cuts by the end of 2025.
The survey revealed that most economists had revised their growth forecasts downward and raised their inflation expectations. Scott Anderson of BMO Capital Markets commented, “The Fed is in a very tough spot right now, facing a more stagflationary outlook even as core inflation remains well above its medium-term target.
Uncertainty around future tariffs’ magnitude, duration, and targets further complicates the monetary policy outlook. They have the potential to roil monetary policy expectations and financial markets.”
A previous poll from December had indicated that three rate cuts were expected for 2025, but that projection has since been trimmed to two moves, one in September and another in December.
Fed Chair Jerome Powell is widely anticipated to maintain the current interest rate range of 4.25% to 4.5% next week. Earlier this month, he noted, “The costs of being cautious are very, very low.
The economy’s fine. It doesn’t need us to do anything, really, and so we can wait and we should wait.”
Aditya Bhave of Bank of America added that the Fed is “almost certainly going to stay on hold, emphasizing patience over panic.”
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