Economists agree: Fed to leave interest rates unchanged this year – Reuters poll
A large majority of economists expect the Federal Reserve (Fed) to keep interest rates unchanged in September and for the rest of this year, according to a Reuters poll conducted between August 12 and 17.
The poll showed that 94 of 104 economists expect the Fed to leave its benchmark rate unchanged at 3.50%-3.75% at the September 15-16 meeting, broadly in line with last month’s survey. Nearly 80% of respondents, or 80 economists, forecast no change in interest rates through the end of the year.
Poll medians also suggest that rates will remain at current levels through the end of 2027.
Economists expect Personal Consumption Expenditures (PCE) inflation to average 3.5% this year, unchanged from last month’s forecast. Inflation is expected to stay above the Fed’s 2% target until at least 2028, according to the poll medians.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.