Fed's Interest Rate Dilemma: Top Risk to U.S. Economy in Coming Year

A recent survey by the National Association for Business Economics revealed that a potential monetary policy mistake by the U.S. Federal Reserve wields the greatest downside risk for the economy over the next year. Economists are closely watching as Fed Chair Jerome Powell prepares to address these concerns.

A recent survey by the National Association for Business Economics has identified a potential monetary policy mistake by the U.S. Federal Reserve as the most significant risk to the U.S. economy in the coming year. Jerome Powell, the Federal Reserve Chair, is expected to address these concerns in a speech on Monday.

Out of 32 professional forecasters surveyed, 39% pointed to a 'monetary policy mistake' as the main risk, followed by 23% who fear the outcome of the Nov. 5 U.S. presidential election and escalating conflicts in Ukraine and the Middle East. The focus remains on the Fed's challenge to reduce inflation while avoiding a spike in unemployment and economic slowdown.

Powell is set to discuss the Fed's decision to cut its benchmark interest rate and future rate adjustments, emphasizing the Fed's strategy to achieve a 'soft landing' for the economy. However, opinions among economists remain divided on the optimal policy path, with concerns over maintaining balanced financial conditions.

(With inputs from agencies.)