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Tuesday, March 19, 2024

Economists Expect “Mount Everest” of Uncertainty to Clear Up by December

Courtesy of Mish.

Here’s a hoot. A Wall Street Survey shows Economists Expect December Rate Hike.

Why? Because economic uncertainty will allegedly vanish between September and December.

A consensus is forming among economists that the Federal Reserve will hold off on its next interest-rate increase until December.

About 71% of the 62 economists surveyed by The Wall Street Journal this month said the Fed will next raise short-term rates at its Dec. 13-14 meeting. That is a sharp rise from the July survey, where half said policy makers would next move in December, and from the June survey, where just 7.8% held that view.

In a July 31 speech, New York Fed President William Dudley argued “for caution in raising U.S. short-term interest rates.” Yet he added “it is premature to rule out further monetary policy tightening this year.”

Two days later, Atlanta Fed chief Dennis Lockhart called the economic picture “ambiguous,” but said, “I can imagine conditions in which we could have a rate hike.”

Charles Evans, the Chicago Fed president, said last week he would prefer to see inflation pick up more before moving, but noted: “I could see one more rate increase even If I would prefer none.”

Economists in the survey indicated they doubted the uncertainty in the economic outlook would clear up in time for the Fed to raise rates at its meeting Sept. 20-21. By December, however, the picture should be clearer, they said.

John Silvia, chief economist at Wells Fargo, said waiting until December would offer “greater clarity on a host of issues.”

Mount Everest of Uncertainty.

The same geniuses who figure things will become more certain between September and December also say Election-Induced Uncertainty Harming U.S. Economy.

For the first time in this election cycle, most economists surveyed by The Wall Street Journal believe uncertainty from the coming election is crimping economic activity.

While every election spurs some economic uncertainty, more than 80% of respondents to the Journal’s latest survey of economists rate the current cycle as presenting an unusual muddle. A majority—57%—said the economy has suffered, at least somewhat, as a result.

“This election introduces a Mount Everest of uncertainty,” said Kevin Swift, chief economist at the American Chemistry Council.

Economists have long believed that, in general, uncertainty has the potential to restrain consumer spending and business investment, if people and businesses have significant questions about the taxes and regulations they will face down the road.

Until this month’s survey, however, the majority of economists thought even an election like this year’s didn’t rise to the level of posing a macroeconomic problem.

Things Will Become More Certain Between September and December

Curiously, just as Hillary’s odds soar through the stratosphere according to Nate Silver Election Odds at 86% as of August 11, economists suddenly discovered a “Mount Everest” of election uncertainty.

Uncertainty “Greater in the Abstract”

“The range of potential political outcomes is much greater in the abstract,” said Lou Crandall, chief economist at Wrightson ICAP. “The market has doubts about how that uncertainty will translate into concrete action.”


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