Economists Try To Predict What’s Next
Economists at Goldman Sachs predict two 25 basis point (bp) cuts this year, in line with the Fed’s forecasts, but with a good chance of a larger cut in November if upcoming employment reports show slower hiring or rising unemployment. The next two monthly jobs reports, for September and October, will land before the November Fed meeting.
“We see the choice between a 25bp and 50bp cut in November as a close call,” Jan Hatzius, chief economist at the investment bank wrote in a commentary.
Michael Pearce, deputy U.S. economist at Oxford Economics, came to a similar conclusion.
“Considering the shift toward an easing bias from Federal Reserve officials, any downside surprises to the labor market data could push them to deliver another 50bp cut in November,” he wrote.
More Division Could Be Ahead
Whatever decision the Fed makes, it might be more contentious than some of its past moves.
The Fed’s moves on rate cuts this week proved tricky enough that one of the policy committee members voted against the other 11, the first dissent since 2022. Fed governor Michelle Bowman explained in a statement Friday why she would have preferred a 25-point cut.
“We have not yet achieved our inflation goal,” she wrote. “I believe that moving at a measured pace toward a more neutral policy stance will ensure further progress in bringing inflation down to our 2% target. This approach would also avoid unnecessarily stoking demand.”
