Most economists expect U.S. Fed to cut rates next week: survey

Source: Xinhua| 2019-10-26 03:28:12|Editor: yan
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WASHINGTON, Oct. 25 (Xinhua) -- Most economists expected the U.S. Federal Reserve to lower interest rates next week, according to a survey released by Bloomberg News on Friday.

In an Oct. 21-24 poll of 40 economists, 85 percent said they expected the Fed to cut interest rates by a quarter percentage point next week, the third rate cut of the year. That would lower the target for the Fed's federal funds rate to a range of 1.5 percent to 1.75 percent.

Meanwhile, 56 percent of economists said that in the event of such a cut, Fed officials would signal that they are likely to pause for some time before making another rate move, either in the Fed's policy statement or through Fed Chairman Jerome Powell's post-meeting press conference.

The Fed has already lowered rates twice this year, in July and September, amid growing risks and uncertainties stemming from trade tensions and a global economic slowdown. The Fed will hold its next policy meeting on Oct. 29-30.

"The Fed is on track for another rate cut next week; the core of the FOMC has not been willing to push back on market expectations for a cut," said Tim Duy, professor at the University of Oregon and a long-time Fed watcher, referring to the Federal Open Market Committee, the Fed's policy making committee.

"I think the Fed will want to sustain the momentum provided by past rate cuts. Chair Jerome Powell has repeatedly stated that the Fed's pivot to a dovish stance has been instrumental in holding up U.S. growth this year," Duy wrote in a blog post earlier this week.

However, the Fed's rate cuts won't go on forever absent a recession, he argued, adding Fed officials would likely signal next week that they need more justification in the data to keep cutting rates.

"I think they will have to eventually signal confidence in the stance of policy relative to the risks such that further rate cuts are not necessary without a clear deterioration in the outlook. I see that as a possibility for next week's statement," he said.