Interest Rate Policy Errors Pose Major Risk to US Economy, NABE Survey Finds

A survey by the National Association for Business Economics highlights concerns that mistakes in the Federal Reserve's interest rate policies could significantly impact the US economy. The survey reveals that economists are more worried about these potential missteps than other risks such as the upcoming presidential election or international conflicts.

In a new survey released as Federal Reserve Chair Jerome Powell prepared to speak on Monday, economists have identified a potential mistake in the Federal Reserve's interest rate policy as the chief risk to the US economy in the coming year. The survey, conducted by the National Association for Business Economics (NABE), indicates that 39% of the 32 professional forecasters interviewed consider a 'monetary policy mistake' to be the 'greatest downside risk' over the next 12 months.

Federal Reserve Chair Jerome Powell is set to address the association, possibly providing insight into the Fed's decision to cut its benchmark interest rate by half a percentage point in September and the considerations affecting future interest rate decisions. The discussions come as Fed officials debate another rate cut at their November meeting, with opinions divided on whether a quarter or half-percentage-point cut would be more appropriate.

Economists surveyed by the NABE also foresee a slowdown in US economic growth to 1.8% next year from 2.6% this year, with inflation expected to settle at 2.1%. Despite the increase in unemployment rates, most respondents do not anticipate a recession until at least 2026.

(With inputs from agencies.)