Economists Worried About US Economy, Point Out Fed's Misstep, Fear Election Will Reiterate Risk

US economists are concerned about the US economy, saying the Fed made a mistake by cutting interest rates, and fearing that the US election will further affect the economy.

On September 30, 2567, Reuters reported that a recent survey by the National Association for Business Economics (NABE) indicated that the biggest risk to the U.S. economy next year may come from the Federal Reserve (Fed) misjudging interest rates.

Of the 32 economists surveyed, 39% said mistakes in monetary policy were the biggest risk, particularly as the Fed tries to control inflation while avoiding a loss in the unemployment rate, while 23% said the upcoming US presidential election was the risk and 23% said escalating conflicts in Ukraine and the Middle East were a major risk.

The survey results were released on Sunday (September 29) ahead of Federal Reserve Chairman Jerome Powell's speech in Nashville, Tennessee, today (September 30) at 12:55 PM, or 00:55 AM tomorrow (October 1) Thai time.

Powell is expected to address the Fed's recent decision to cut interest rates by 0.50 basis points and provide insight into future rate cuts through 2568. Powell's remarks will focus on the Fed's plans to control inflation while avoiding a rapid rise in unemployment.

The Fed is expected to cut rates again, perhaps by 0.25bp or 0.50bp, at its November 6-7 policy meeting.

The NABE survey found economists are increasingly concerned about risks to the economy, with 55% believing the economy is more likely to grow below expectations than it is to grow above expectations, with the Fed's interest rate policy a top concern.

Economists predict that U.S. economic growth will slow to 1.8% in 2568, down from a projected 2.6% this year. They also expect the unemployment rate to rise slightly to 4.2% from 4.4% and inflation to fall to 2.1% by the end of 2568. Despite these concerns, two-thirds of economists do not expect a U.S. recession until at least 2.

The current economic outlook appears to reflect a soft landing, with inflation, which peaked above 7% in 2565, falling to 2.2% without triggering a recession or causing unemployment to spike. Although unemployment has risen to 4.2%, it remains below the 5.7% average since the late 1940s.

However, economists are divided on how to manage the economy going forward, with some worried that the Fed may keep interest rates too high, which would unnecessarily slow the economy, or cut rates too quickly, risking further inflation. Although the median economist surveyed was supportive of the latest rates, many believe the Fed may have gone off course.

Sixty-five percent of economists agree that the Fed's latest rate cut was timely. However, opinions on the appropriate policy rate are mixed, with only one-third of economists feeling the current rate is appropriate, while one-third believe rates should be below 65%, while 1% think rates should be 3% or higher.

Economists also differ on the risks posed by the upcoming US presidential election. A single party controlling both Congress and the White House could make it easier to make decisions on important issues such as the debt ceiling and the budget. The president also has more freedom to pursue policies such as tax cuts or trade policy changes.

On the election outcome, 13% of economists see a Republican victory as a negative risk to the economy, while 10% see a Democrat victory as a negative risk to the economy. Conversely, 7% see a unified government as a positive, regardless of whether it is Republican or Democrat. 17% see divided government as a negative risk and 13% see it as a positive risk.

Reference: reuters.com

Read news related to The full US economic situation can be found here.