Economists: The Federal Reserve's policy path is unlikely to have a clear direction before September

According to the Zhitong Finance APP, a recent survey of economists shows that the Federal Reserve will need several months to clearly understand how the policy changes of the Trump administration will impact the U.S. economy, making it unlikely for policymakers to consider adjusting interest rates before September.

The survey conducted from June 6 to 11 revealed that over 90% of the economists surveyed believe that the Federal Reserve will not gain sufficient clarity until at least September to assess the impact of the Trump administration's trade, immigration, and fiscal spending policies on the economy. Slightly more than half of the economists surveyed think that this clarity will not emerge until the fourth quarter, with some believing it may take until next year.

Most economists surveyed indicated that there are risks of rising inflation and unemployment rates. Half of the respondents believe that the Trump administration's policies pose equal threats to inflation and employment. The remaining majority of economists have differing opinions on which aspect faces higher risks.

Regarding the prospects for a Federal Reserve rate cut, the median forecast shows that the economists continue to predict a 25 basis point cut in September and December.

However, the anticipated effects of the Trump administration's tariff policies have yet to materialize. The U.S. CPI in May was below expectations, and the unemployment rate remained stable at 4.2%. Nevertheless, U.S. companies have indicated a willingness to pass some of the tariff costs onto consumers. At the same time, there is evidence that a significant reduction in foreign labor may be tightening the labor market, which could help curb the rise in unemployment rates.

The market currently widely expects that the Federal Reserve will remain on hold for the fourth consecutive time at next week's policy meeting. Policymakers have repeatedly emphasized that they will maintain a wait-and-see approach until the policies of the Trump administration and their economic impacts become clearer. Brian Horrigan, chief economist at Loomis, Sayles & Company, stated, "In a situation where both inflation and inflation expectations are rising, the Federal Reserve will become more cautious."

Policymakers will also release a new round of economic forecasts and interest rate path expectations next week, but the overall uncertainty has led economists to reconsider how to view these forecasts. About half of the economists indicated that, compared to previous forecasts, they would "slightly" or "significantly" lower their confidence in this forecast. Nevertheless, they still expect the Federal Reserve to lower its economic growth expectations for this year (compared to the March forecast).

Regarding the economic outlook, the surveyed economists hold a slightly optimistic view, with the proportion of respondents predicting an economic recession in the next 12 months dropping from 26% in late April to 10%. Over 70% of economists stated that if the Federal Reserve's two goals—price stability and full employment—conflict, policymakers will maintain interest rates unchanged for a period of time. However, most of these individuals believe that policymakers will ultimately choose to cut interest rates.

Scott Anderson, Chief Economist for the U.S. at BMO Capital Markets, stated: "The Federal Reserve will still prioritize controlling the risk of rising inflation expectations, but if the unemployment rate further deviates from full employment levels, they will shift to support the economy and labor market."