US Expert: "Fed Rate Hikes End... 1%P Cut Expected Next Year"

US Bankers Association Economic Advisory Committee Outlook

U.S. Federal Reserve (Fed) is expected to conclude its high-intensity tightening cycle and likely cut interest rates by about 1 percentage point next year, according to forecasts from U.S. bank economists.

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On the 11th (local time), Bloomberg reported that the Economic Advisory Committee of the American Bankers Association (ABA) made this forecast in its latest outlook. The ABA advisory committee includes 14 economists from JP Morgan Chase, Morgan Stanley, Wells Fargo, and others.

Simona Mokuta, chair of the advisory committee, said, "The majority of the members believe that the Fed's tightening process has concluded, considering the empirical progress made so far and the expected future improvements related to inflation."

The advisory committee predicted that the U.S. could avoid a recession. The probability of a recession occurring next year was forecasted to be below 50%.

However, due to the Fed's rate hikes so far, economic growth is expected to slow significantly and unemployment to rise over the next few quarters. The committee anticipates that growth rates for the next three quarters will slow to below 1% on an annualized basis. The unemployment rate is projected to rise from 3.8% in August to 4.4% by the end of next year. The consumer price inflation rate is expected to fall from 3.2% in July to 2.2% by the end of next year, indicating that inflationary pressures will ease.

Chair Mokuta said, "The committee's consensus is that the possibility of a soft landing has dramatically improved in the short term, but at the same time, there are significant concerns about how sustainable this remarkable economic recovery will be."

The Fed will decide whether to raise interest rates at the upcoming Federal Open Market Committee (FOMC) regular meeting next week. The market widely expects rates to remain unchanged this month, but opinions are divided on the possibility of a rate hike at the November meeting.

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