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Business News/ News / World/  Fed is done raising interest rates, economists say

The chief economists at the American Bankers Association are of the opinion that the US Federal Reserve is done with raising interest rates and will likely to cut them by roughly one percentage point next year, reported the Bloomberg.

The latest forecast from the Economic Advisory Committee of the American Bankers Association shows that the US will probably avoid the recession though the economic growth slowdown in coming quarters pushing up unemployment while reducing inflation.

“Given both demonstrated and anticipated progress on inflation, the majority of the committee members believe the Fed’s tightening cycle has run its course," Bloomberg reported quoting Simona Mocuta, chair of the 14-member panel and chief economist at State Street Global Advisors.

The US Federal Reserve is widely expected to hold rates steady at its meeting next week, though investors are divided over whether it will follow that up with a rate increase later in the year, the report said.

The ABA advisory committee includes economists from JPMorgan Chase & Co., Morgan Stanley and Wells Fargo & Co. Its forecasts are regularly presented to Fed Chair Jerome Powell and fellow members of the central bank’s board in Washington.

The Bloomberg reported that the committee sees economic growth slowing to less than an annualized 1% rate in the coming three quarters in response to the Fed’s past interest-rate increases and a tightening of credit conditions, according to their median forecast. 

The unemployment is projected to rise to 4.4% by the end of next year, from 3.8% in August, while CPI is forecast to ease to 2.2% from 3.2% in July.

“As a consensus for the committee, the odds of a soft landing have improved quite dramatically in the near term," Bloomberg reported Mocuta as saying. “But at the same time, a lot of concerns remain about how sustainable is this extraordinary resilience that the economy has so far demonstrated," he added.

The committee sees the odds of a recession next year at just under 50%.


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Updated: 12 Sep 2023, 02:15 AM IST
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