75% of Bloomberg Economists Surveyed Think the Fed Will Cut Rates This Fall
Nearly three-quarters of respondents say the US central bank will use the July 30-31 gathering to set the stage for a quarter-point cut at the following meeting in September. They’re divided, however, about how policymakers will do so. – Bloomberg 7/26/2024
As realtors and homeowners, the anticipation of lower interest rates is a topic that touches us all. Whether you’re guiding clients through the exciting journey of purchasing a new home or helping homeowners explore refinancing opportunities, understanding the economic landscape is crucial. Recent developments in inflation and consumer spending provide promising signals that rate cuts may be on the horizon this fall.
Encouraging Signs for a Rate Cut
In June, the Federal Reserve’s preferred measure of underlying inflation, the core personal consumption expenditures (PCE) price index, rose by a modest 0.2% from May and 2.6% year-over-year. This data, released by the Bureau of Economic Analysis, shows that inflation is being kept in check. Consumer spending, adjusted for inflation, also saw a 0.2% rise, following a revised higher increase in May.
These figures suggest that the Federal Reserve’s efforts to control inflation are bearing fruit without severely impacting the economy. The cooling of core inflation to a three-month annualized rate of 2.3%, the lowest since December, further supports this positive outlook.
Market Reactions and Future Expectations
The financial markets responded positively to this data, with Treasuries rallying and stock futures rising. Even though previous data revisions hinted at slightly higher inflation, the overall trend remains favorable. The Federal Reserve is expected to maintain its benchmark interest rate at a two-decade high in their upcoming meeting, but many investors are optimistic about a potential rate cut in September.
Rubeela Farooqi, Chief US Economist at High Frequency Economics, noted that the progress on both inflation and labor market conditions might prompt policymakers to consider a rate cut soon. This sentiment is echoed by the steady rise in services inflation, excluding housing and energy, which has also shown a modest increase of 0.2% in June.
Detailed Insights from the Federal Reserve
According to a recent Bloomberg News survey, the Federal Reserve is likely to signal its plans to cut interest rates in September during the upcoming July 30-31 meeting. Nearly three-quarters of surveyed economists expect the central bank to set the stage for a quarter-point cut at the following meeting in September. This move is anticipated to initiate reductions each quarter through 2025.
Half of the respondents foresee officials signaling the upcoming rate cut through both the policy statement and Fed Chair Jerome Powell’s press conference. All respondents expect the Fed to keep rates unchanged at a more than two-decade high during the July meeting.
Insights from Federal Reserve Officials
Fed officials, led by Powell, have indicated that the labor market has reached a balance and inflation is trending towards the central bank’s 2% target, bolstering the case for lowering borrowing costs. Emphasizing maximum employment and stable prices, Powell and other officials have expressed growing confidence in the economy’s trajectory.
Key Indicators:
- Core PCE prices and real consumer spending each advance 0.2%
- Measures of wage growth cooled in June as saving rate fell
Implications for Realtors and Homeowners
For realtors, the prospect of a rate cut in the fall could reinvigorate the housing market, making mortgages more affordable and attracting new buyers. Homeowners, on the other hand, might find this an opportune moment to refinance their existing loans at lower rates, reducing their monthly payments and overall interest costs.
As we look forward to these potential changes, we remain dedicated to monitoring rates for our clients who have already closed loans with us. Our commitment is to provide the best possible advice and opportunities. If you’re considering a new purchase or refinance, we are here to help navigate these potential changes and secure the best terms for you.
Navigating Economic and Political Uncertainties
While the upcoming presidential election adds a layer of uncertainty, a majority of economists believe it will not significantly impact the timing of rate cuts. Some Fed watchers suggest that political considerations might raise the bar for cuts, but Powell and others assert that the election will not influence borrowing cost decisions.
What to Expect Going Forward
As we await further data, including the July jobs report, we continue to track economic indicators and Federal Reserve decisions that impact the real estate market. Your financial well-being is our priority, and we are here to support you every step of the way.
Please feel free to reach out with any questions or to discuss how these developments might affect your specific situation. We are here to assist you in navigating these economic changes and making informed decisions for your financial future.
