Wall Street Economists Are Looking at a September Rate Pause

Federal Reserve Chair Jerome Powell has left the door open to another interest-rate hike, but Wall Street economists see the signs pointing in one direction ahead of the central bank’s September meeting: pause.

Policymakers in recent days have said they’re waiting on incoming data to guide their decision on whether to raise rates at the Fed’s next gathering. The latest surprisingly mild inflation reports, signs of moderating consumer spending and evidence of diminishing wage pressures have suggested there’s little urgency to raise rates next month.

Further tame inflation readings expected before the Fed’s Sept. 19-20 meeting, as well as looming headwinds including the resumption of student-loan payments, will give them more reason to hold off, even if temporarily, economists say. Markets were pricing in about one in five odds of a hike in September.

“I suspect the data will be mild enough to meet with the Fed’s approval,” said Douglas Porter, chief economist at the Bank of Montreal. “Our core view is that the Fed has done enough, with short-term rates now solidly in positive real terrain, core inflation beginning to come down, and the labor market softening around the edges.”

US Inflation Wages Cool