The chief economists of some of North America’s largest banks said the Federal Reserve is done raising interest rates and may lower them by about a percentage point next year.
While the U.S. may avoid a recession, economic growth appears to be slowing significantly in the coming quarters, pushing up unemployment while lowering inflation. latest forecast Data from the American Bankers Association Economic Advisory Council shows.
“Given confirmed and expected developments in inflation, most committee members believe the Fed’s tightening cycle is over,” said Simona Mokuta, chair of the 14-member panel and chief economist at State Street Global Advisors. Mocuta) said.
The Fed is widely expected to keep interest rates on hold at next week’s meeting, but investors are divided over whether the central bank will raise rates later this year.
The ABA advisory committee includes economists from JPMorgan Chase, Morgan Stanley and Wells Fargo. Its forecasts are regularly presented to Federal Reserve Chairman Jerome Powell and other members of the central bank’s board of directors in Washington.
Based on its median forecast, the committee believes economic growth will slow to below 1% annualized over the next three quarters due to the Federal Reserve’s past interest rate hikes and tighter credit conditions.
The unemployment rate is expected to rise to 4.4% by the end of next year from 3.8% in August, while consumer price inflation is expected to slow to 2.2% from 3.2% in July.
“As a consensus of the committee, the likelihood of a soft landing has increased significantly in the short term,” Mokuta told reporters via Zoom. “But at the same time, people are still concerned about this extraordinary resilience that the economy has shown so far. Do you continue to be worried?”
The committee puts the chance of a recession next year at just under 50%.
Svlook
