DWS: The outlook for the U.S. economy remains uncertain, expecting the Federal Reserve to cut interest rates by 0.25% in November
DWS Chief Economist Christian Scherrmann stated that the outlook for the U.S. economy is filled with uncertainty, especially regarding inflation, and it is expected that the Federal Reserve will cut interest rates by 0.25% in November. Although recent data shows strong economic growth, there are no signs of overheating. The political outlook is also unclear, which may affect monetary policy. The Federal Reserve will continue to rely on economic data, striving for a soft landing for the economy, and future policies will depend on economic data, which may maintain a hawkish tone
According to the Zhitong Finance APP, the Federal Reserve will hold a monetary policy meeting from November 7 to November 8. Christian Scherrmann, Chief Economist for DWS in the U.S., stated that recent data shows that U.S. economic growth remains strong, but there are no signs of overheating. However, the outlook for the U.S. economy is still full of uncertainty, especially regarding inflation, so a cautious approach is maintained, and a 0.25% rate cut by the Federal Reserve is expected.
U.S. states are gradually announcing election results, and Scherrmann believes that the political outlook is also full of variables. He believes that even two days after the election, it may still be difficult to determine the final results for the presidency and Congress. The future direction of fiscal and trade policies will become an important basis for the Federal Reserve in formulating monetary policy. Stimulating demand while the Federal Reserve is committed to controlling inflation may backfire.
He mentioned that the weakness in the U.S. labor market may be due to data quality and volatility. Although inflationary pressures have eased, they remain a risk factor that cannot be ignored. Demand is still sensitive to rate cut expectations; for example, the demand for interest-sensitive durable goods has significantly rebounded due to market expectations of rate cuts, and consumer confidence is believed to have improved as well.
He stated that in the face of many uncertainties, Federal Reserve officials will continue to rely on data, striving for an economic soft landing. The core message of the press conference is expected to emphasize that policy depends on economic data, but the wording may lean slightly hawkish. The current policy interest rate is still well above neutral levels, indicating that the Federal Reserve still has some room for adjustment in the meetings in November and December. As for the December meeting, he admitted that whether the Federal Reserve will cut rates again or remain on hold will be a rather tricky issue.