The latest Reuters poll of economists showed that a majority of them see the US Federal Reserve (Fed) delivering a rate cut again in September and once more next year, as escalating US-China trade tensions drive the US economy closer to a recession.
Key Findings:
“Despite expectations for further easing, the Aug 6-8 poll gave a median 45% probability of the U.S. economy slipping into a recession in the next two years, up from 35% in the previous poll and the highest since that question was first asked in May 2018.
Nearly 70% of economists responding to an additional question said the latest developments had brought the next U.S. recession closer.
Financial market traders have ramped up bets for more rate cuts, pricing in September, followed by another 25 basis point cut in October, and a more than a 40% chance of another in December.
But it is not clear policymakers are keen to cut rates again, let alone several, especially after Fed Chair Jerome Powell downplayed the latest reduction as “a mid-cycle adjustment to policy.”
Asked if the U.S. economy needs more rate cuts this year nearly three-quarters of respondents said yes. But the rest did not.
According to the latest Reuters poll, U.S. economic growth was forecast to slow to an annualized rate of 1.8% by end-2020 from the 2.1% reported for last quarter and well below the 3.1% rate in the first.”
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