Executive Summary

A foreign media outlet's October survey reveals widespread expectations for the Federal Reserve (Fed) to cut interest rates at its upcoming meeting. However, the survey also raises serious concerns about the current economic landscape.

Key Survey Findings

• 92% of respondents expect a rate cut, but only 66% believe it should happen.
• Key concerns include: data scarcity due to government shutdowns, a potential AI bubble, persistent inflation, and political influence on Fed decisions.
• Respondents anticipate further rate cuts in December and January, totaling 100 basis points by the end of 2026.
• Opinions are divided on whether the Fed risks easing policy too aggressively or not aggressively enough, given data limitations.
• Respondents expect US GDP growth of 1.9% this year, 2.2% in 2026, and 2.3% in 2027.
• Tariffs remain a significant risk to economic growth, although their impact on inflation has been less than anticipated.

Concerns Raised

Survey participants expressed anxiety regarding several key issues:

Data Scarcity

Government shutdowns lead to a scarcity of economic data, making it difficult for the Fed to make informed decisions. This information gap leaves policymakers feeling "like they are flying in a blizzard with their eyes closed," according to Guy Lebas of Janney Montgomery Scott.

AI Bubble

Nearly 80% of respondents believe AI-related stocks are overvalued, suggesting a potential bubble. John Lonski of Lonski Group warns that "once the AI bubble bursts, only those with deep pockets in AI will survive."

Inflation

Inflation remains above the Fed's target, raising questions about whether cutting rates is the right move. Richard Bernstein of Richard Bernstein Advisors believes that "financial conditions are near historically easy levels, GDP growth is projected at 3.5%-4%, financial asset prices are soaring, and the inflation rate remains well above the Fed's target. In normal times, the Fed would never cut rates."

Political Influence

There are concerns that politics are playing a role in the Fed's decisions. Some believe that rate cuts are driven by political, rather than economic, considerations.

Growth and Inflation Projections

Economists have raised their economic growth forecasts but still expect the unemployment rate to reach approximately 4.5% next year. The inflation rate is projected to be around 3% this year, falling to only 2.8% in 2026 and 2.6% in 2027.

Tariff Risks

Tariffs remain a significant risk to economic growth, although their impact on inflation has been less than anticipated. Forecasters believe the full impact of tariffs on consumer prices has yet to be seen.

Conclusion

While most survey participants expect the Fed to cut interest rates, significant concerns remain about the current economic climate. Investors should closely monitor economic developments and carefully assess risks before making any investment decisions.