A recent Reuters poll of 103 economists indicates a significant shift in expectations regarding the Federal Reserve's monetary policy trajectory. According to the survey, 56 economists now anticipate that the Fed will maintain its policy rate within the current 3.5%-3.75% range at least through September, a notable change from the previous poll in late March, when most expected at least one rate cut by that time [1].
The poll also reveals that inflation forecasts have been revised upward. Economists now project the Personal Consumption Expenditures (PCE) Price Index to average 3.7% in the second quarter, 3.4% in the third quarter, and 3.2% in the fourth quarter of the year. These figures are higher than the March poll's forecasts of 3.3%, 3.1%, and 2.9% for the respective quarters [1].
Despite the expectation of a prolonged policy hold in the near term, the consensus among economists still points to monetary easing later in the year. Specifically, 71 out of 103 economists believe the Fed will implement at least one rate cut before the end of 2024, reflecting the view that a gradual slowdown in inflation could eventually allow for looser monetary conditions [1].
These findings underscore the delicate balancing act faced by the Federal Reserve, as it navigates inflation rates that remain above its 2% target while monitoring for signs of moderating price pressures in the coming quarters [1].
CONCLUSION
The Reuters poll highlights a shift toward expectations of a longer period of steady Fed rates due to persistent inflation, with most economists now seeing the first rate cut delayed until after September. However, the majority still anticipate at least one rate cut before year-end, contingent on inflation moderating as projected. This evolving outlook suggests ongoing uncertainty for markets regarding the timing and pace of Fed policy easing.