---
title: "Market bets on the Fed cutting rates in September! But there are still a few voices refuting"
type: "News"
locale: "zh-HK"
url: "https://longbridge.com/zh-HK/news/209814668.md"
description: "The market expects the Federal Reserve to cut interest rates in September, but some experts believe that rates should be kept stable. According to a survey, only two economists believe that the Fed will not cut rates before the end of 2024. The reasons for the rate cut are slowing inflation and rising unemployment. However, one economics professor believes that a rate cut may be premature and could lead to a resurgence of inflation and economic hardship. He believes that rates should be kept at a higher level for a longer period. The federal funds rate is crucial for price stability and full employment. Higher rates will curb borrowing and consumption, slowing economic growth"
datetime: "2024-07-25T09:26:04.000Z"
locales:
  - [zh-CN](https://longbridge.com/zh-CN/news/209814668.md)
  - [en](https://longbridge.com/en/news/209814668.md)
  - [zh-HK](https://longbridge.com/zh-HK/news/209814668.md)
---

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# Market bets on the Fed cutting rates in September! But there are still a few voices refuting

**The market expects the Federal Reserve to cut interest rates at the September meeting, but some experts believe the Fed should maintain rate stability, or at least keep the status quo.**

The mainstream view in the market currently is that the Federal Reserve will lower the federal funds rate in September or before the end of the year. According to the CME Group's FedWatch Tool, traders are pricing in a 100% probability of a rate cut by the Fed in September.

In a survey of prominent economists by The Wall Street Journal in July, when asked about the federal funds rate, out of 67 economists, only two indicated that the Fed would not cut rates before the end of 2024.

The general consensus is that **over the past few months, as inflation and employment data have shown a slowdown in the pace of inflation and an increase in the unemployment rate, the reasons for a rate cut have become more compelling.**

## Inflation Struggle Is Not Over Yet

Sean Snaith, an economics professor at the University of Central Florida and one of the two respondents in the survey who believe the Fed will not cut rates soon, stated in an interview, "We have not reached the 2% inflation target. The initial decline in inflation was rapid, but the slowdown has now almost stalled."

Snaith's analysis suggests that a rate cut by the Fed in September may be premature and could reignite inflation, similar to the roller-coaster trend of the 1980s, which would necessitate a future rate hike by the Fed and cause economic pain.

Moreover, **if people see prices rising rapidly for an extended period, economic theory suggests they may start making financial decisions that exacerbate inflation, such as making large purchases earlier than they had planned.**

This is why economists pay attention to consumer inflation expectations surveys, and why Snaith believes the Fed should keep rates at a higher level for a longer period.

He said, "The longer rates stay at a higher level, the more people expect rates to stay at a higher level. And when inflation expectations become entrenched in the economy, it becomes harder to break the control of inflation."

The federal funds rate is a key tool for the Fed to achieve its dual mandate of price stability and full employment, and setting it at the appropriate level is a delicate balance for policymakers.

A higher federal funds rate leads to an increase in mortgage and all other types of loan rates, which suppress borrowing and consumption, slowing economic growth and inflation. Conversely, a lower federal funds rate encourages loose monetary policy and faster economic growth.

In March 2022, the Fed began rapid rate hikes to address concerning high inflation, with inflation reaching as high as 9.1% in June of that year, hitting a 40-year high. The Fed paused rate hikes in July 2023 and has since kept rates at a high level for 23 years. Recently, inflation has dropped to 3%, nearing the Fed's 2% target.

Inflation reports for May and June indicated that inflation is still slowing down gradually, leading many experts to predict that by September, the Fed will finally start the long-awaited rate cuts. However, this is still an expectation, and rate cuts are not set in stone, as Fed Chair Powell has refused to specify a particular timing for rate cuts

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