Two survey respondents also predicted Governor Randal Quarles, the Fed’s vice chairman for banking supervision, would vote against a cut. Dissents by governors are much less common than those by regional presidents. No governor has done so since Mark Olson opposed a rate increase in the wake of Hurricane Katrina in September 2005.
Economists were also asked what signal they would take from a decision by policy makers to repeat in their post-meeting statement that they plan to “closely monitor” incoming information and “act as appropriate to sustain the expansion.” That language was interpreted as flagging a likely cut in July when it first appeared in the June statement.
Only four of the 36 respondents to the question said that would signal a September cut was likely, while 29 said such language would only open the door to a September cut.
“Beyond the July meeting, prospects for further policy adjustments will likely be conducted on a meeting-by-meeting basis,” said Brett Ryan, senior U.S. economist at Deutsche Bank Securities in New York.
If the Fed cuts rates that would mean the central bank’s two main monetary policy tools were, technically, working in opposite directions. The Fed has been shrinking its balance sheet slowly by allowing some maturing securities to roll off without being replaced. That slightly tightens policy by removing the downward pressure on longer-term interest rates provided by the Fed’s bond purchases.
Just 19% of economists, however, said a rate cut would prompt officials to end the balance sheet runoff ahead of schedule. The process is due to wind up at the end of September.
In a final question, more than two-thirds of the economists said the strength of the U.S. dollar was not becoming a bigger factor in Fed rate decisions. The Fed’s own trade-weighted index of the dollar rose to a 17-year high on May 31 before falling back about 1.5%.
This article was provided by Bloomberg News.