US financial news live updates: Debt ceiling, Social Security checks, initial unemployment claims…
Experts don’t expect Fed rate cut in 2023, see greater risk of debt default
Markets have priced in a reduction of Fed interest rates by 50 basis points by the end of the year based on the expectation of the US economy going into recession and the failure of some regional banks this year. However, in Reuters’ most recent poll of economists, it found that the majority don’t see the Federal Reserve cutting interest rates before the end of 2023.
Their opinion is based on continued low unemployment and that inflation is still more than double the US central bank’s target of 2%. “In our view, rather than lean against a mild recession, the Fed would view it as an acceptable price for bringing inflation back down to target,” said Michael Gapen chief US economist at Bank of America.
A slight majority of respondents to the latest survey, 22 of 41, also said that there was a greater risk of the US defaulting in the latest round of brinksmanship over raising the debt ceiling. Lawmakers have less than two weeks before the US hits the X-date, when there is no money left in the Treasury to pay the federal government’s bills, said to be 1 June by Secretary Janet Yellen.
“No matter how you slice it, the US faces tough choices to bring its fiscal house in order,” said Michael Gregory, deputy chief economist at BMO Capital Markets. However, further political brinkmanship – or even worse, failure to raise the debt limit – would be like adding salt to the wound.”
