Fed policy mistakes are said to be the main risk to the US economy next year. Powell will speak, and the parties have different views on interest rates.

As Fed Chairman Powell is about to speak on Tuesday, a survey of economists by the National Association for Business Economics (NABE) shows that the Fed's possible policy mistakes in the final stage of fighting inflation are the main risk to the US economy next year. Among the 32 professional forecasters surveyed, 39% believe that "monetary policy mistakes" are the biggest downside risk to the US economy in the next 12 months, higher than the proportion of those who believe that the results of the presidential election (23%) and the intensification of conflicts between Russia, Ukraine and the Middle East (23%) are the biggest downside risks.

The survey was released last Sunday, and the results show that people are concerned about whether the Fed can maintain a steady decline in inflation to the 2% target while avoiding a sharp increase in unemployment when easing monetary policy. Powell will speak to the association in Nashville, Tennessee at 1:55 am Beijing time on Tuesday, and is expected to explain the reasons for the 50 basis point rate cut in September and the considerations for the expectation of subsequent rate cuts. It is expected that the Fed's policy meeting in November will cut interest rates by another 25 or 50 basis points.

The association's panel of economists said overall risks to the U.S. economy have risen, with 55% believing that the U.S. economy is more likely to perform worse than expected, and that Fed policy is the primary factor that could lead to a slowdown. The panel predicts that U.S. economic growth will slow from 2.6% this year to 1.8% next year, with unemployment rising from 4.2% to 4.4% and inflation reaching 2.1% by the end of next year. Two-thirds of respondents expect no recession before 2026.

Inflation, as measured by the PCE price index, fell from its peak in 2022 to 2.2% last month, and unemployment rose from last year's low to 4.2%, but remains below average, which looks like a textbook "soft landing." However, there is wide disagreement about how the Fed will do this job, with 65% of respondents believing that the latest rate cut was "just in time," but only a third believing that the current policy rate is "just right," with the rest having different views. Among the other risks mentioned, respondents were divided on the impact of different election results on the economy, as well as on the impact of a Republican or Democratic sweep and a divided government.