Anna Wong, chief US economist at Bloomberg Economics, stated, “The labour market has been cooling for a while — the deterioration isn’t sudden. Given its dual mandate, the Fed is likely behind the curve on cutting rates. As such, we expect the unemployment rate to reach 4.5 percent by the end of 2024.”
One potential complication for the September rate cut is its proximity to the US presidential election in November. Cutting rates less than two months before the election could attract criticism of political motivations.
A third of economists believe this timing would raise the threshold for cuts, requiring more compelling data. However, the rest agree with Powell’s view that the election timing will not impact decisions on borrowing costs.
Despite the uncertainty surrounding the presidential election and congressional control, economists assert that President Biden’s withdrawal from the race has not changed their economic outlook. An overwhelming majority have not altered their forecasts for interest rates or growth due to his decision.
Nonetheless, a third of the Fed watchers indicate that political uncertainty from the election increases downside risks to growth. Changes in tax policies and spending could affect the 2025 economy and potentially interest rates.
