Economists expect only a quarter-point rate cut from the Fed

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The Federal Reserve is expected to drop interest rates by just a quarter-point at their upcoming September meeting, according to a majority of economists surveyed.

Almost 80% of them believe the Fed will settle for a modest reduction, bringing the rates down to a range of 5% to 5.25%.

Only a few think a larger cut is on the table, and the chances of an unscheduled rate adjustment are slim, sitting at about 10%.

Fed policymakers aren’t too keen on aggressive moves right now. Why? Well, the July jobs report was a bit of a letdown.

Hiring slowed down, and the unemployment rate hit its highest point in nearly three years.

Despite this, Fed leaders, led by Jerome Powell, are sticking to their guns. They’re focused on two things: keeping employment high and bringing inflation down to their 2% target. 

The Fed isn’t rushing

Some heavy hitters on Wall Street, like JPMorgan Chase and Citigroup, are now calling for a half-point rate cut next month after seeing the latest jobs numbers. 

Futures investors seem to agree, pricing in a total of a 100-basis-point reduction by the end of the year. They’re thinking the Fed might start with a 50-basis-point cut in September.

But the economists aren’t buying it.

They think the Fed will play it safe with smaller, quarter-point cuts not just in September, then also in November, December, and even into early 2025.

The big question on everyone’s mind: what’s happening with inflation? It’s likely that US inflation nudged up slightly in July, but not enough to spook the Fed. 

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