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Economists: More Rate Cuts on the Way

Fed Rate

Fed RateInterest rates are likely to be cut again, according to a survey from Bankrate [1], meaning the first interest rate in around a decade earlier this year may be just the start. According to Bankrate, despite Fed Chairman Jerome Powell’s previous statements, economists are not convinced that another rate cut is unlikely.

According to Bankrate’s survey, 67% of economists believe the Fed will make two or more cuts, while 14% predicted one more. Additionally, another 10 percent predict rate cuts as well as the return of quantitative easing.

The likelihood of more rate cuts is due in part to a deteriorating economic outlook. Ninety percent of economists in Bankrate’s survey said that the risks to the outlook were tilted toward the downside, up from 80 percent in the second quarter.

“The question we keep asking ourselves is, how many more blows can this aging business cycle take?” Bernard Baumohl, Chief Global Economist at the Economic Outlook Group told Bankrate. “We expect the economy will barely avoid a recession next year, and the consumer should get credit for that. But the escalating trade dispute, along with the havoc it has caused to supply chains and how it dampened economic growth worldwide will all be with us — at least until 2021.”

Powell, on the other hand, has described the economic outlook as “favorable”. During the Fed’s post-meeting press conference on July 31, he stated that the 25-basis-point reduction was largely meant to keep it that way at a time when a number of uncertainties are threatening the outlook.

Bankrate’s survey also revealed that economists see a recession on the way. According to survey respondents, there is a 41% chance of the U.S. entering into a recession by November 2020. However, there is little chance of hitting a rough patch anytime soon, as economists also predict continued employment and wage growth.

“The economy has been chugging along, with low unemployment and rising incomes. But 90 percent of the economists polled see the risks as tilted toward the downside,” said Bankrate Chief Financial Analyst Greg McBride in a note to consumers. “Heed the warning and stabilize your finances now. Boost your savings, pay down and pay off high-cost debt to create some breathing room in your budget that may come in handy whenever the economy slows and your income is reduced.”