Key Takeaways

• The Economy
  • 2023 real GDP growth estimate +2.5%, vs. +0.7% 2022 (median forecast, 4Q/4Q)
  • 2023 unemployment rate estimate +3.9%, vs. +3.6% in 2022 (4Q average)
  • 2023 inflation estimates:
    • CPI/Core CPI +3.3%/+4.0%
    • PCE/Core PCE +3.1%/+3.5%

• Monetary Policy
  • Timing of Fed Funds rate cut: 2Q24, 46.7% of respondents
  • Amount of Fed Funds rate cut to stabilize: >100 bps, 93.3% of respondents
  • Timing of Fed Funds rate returning to neutral: 2026, 53.3% of respondents
  • Fed Funds neutral rate estimate: 2.0-3.0% 66.7% of respondents

Setting the Scene

The Fed’s Rate Conundrum

The Fed Funds rate stands at 5.25-5.50%, after increasing 525 bps since March 2022, an unprecedented rate. However, over the last four Federal Open Market Committee (FOMC) meetings, the Fed has only raised rates one time, a 25 bps hike at the July meeting. This leaves markets asking if the Fed is done. We look at the bull/bear debate for the Fed’s rate conundrum:

• Bull case: As the unprecedented pace of rate hikes is impacting the economy more than what is shown in the data – regional bank turmoil, credit tightening, working through the monetary policy lag time – we are nearing/at the end of the rate hike cycle and rate cuts might be coming sooner than expected.
• Bear case: As the labor market remains tight and the economy has not slowed – or at least not enough for the Fed – rates will remain higher for longer.

Market consensus is that the Fed is done, with almost a 100% probability of a pause at both the December and January FOMC meetings. As to when the Fed might begin cutting rates, probabilities are growing for a cut at the May FOMC meeting, now almost a 60% probability. That said, the majority still points to cuts by the summer.

2H23 Survey Results Summary

Economic Forecasts

• 2023 GDP growth expected at +2.5% (median forecast, 4Q/4Q); 2024 expected at -0.7%
• 93.3% of economists expect the long-term potential GDP growth rate of 1.5-2%, with 85.7% stating this is unchanged in the last twelve months
• Unemployment rate forecasted to end 2023 at +3.9%, and increase to +4.4% in 2024 (4Q average)
• CPI – expected +3.3% to end 2023, +2.2% to end 2024 (2022 actual 7.1%)
• Core CPI – expected +4.0% to end 2023, +2.6% to end 2024 (2022 actual 6.0%)
• PCE – expected +3.1% to end 20232, +2.3% to end 2024 (2022 actual 5.9%)
• Core PCE – expected +3.5% to end 2023, +2.4% to end 2024 (2033 actual 5.1%)

Inflation

• 38.5% of respondents indicated the Fed is poised to make a mistake in tackling inflation by overshooting, while another 38.5% do not expect a mistake
• 53.8% of respondents are very confident the Fed can achieve its 2% goal in a sustainable way
• As to whether the Fed will tolerate an above 2% inflation level,5% of respondents do not believe so
• 46.2% of respondents expect a 0% to 15% probability the U.S. will experience structurally higher inflation over the longer run (defined as longer than three years from now)
• 92.3% of respondents expect inflation expectations will not become unanchored
• The top factors listed as most important to core inflation forecasts include: consumer spending on services, stickiness of wage increases and inflation expectations
• 85.7% of respondents do not see any concern of disinflation at this point in time

Rates

• 46.7% of respondents expect the Fed to cut rates in 2Q24
• Once the Fed begins cutting rates, 93.3% of respondents think it will take over 100 bps of cuts before stabilizing
• 53.3% of respondents expect the Fed Funds rate to return to neutral in 2026
• 66.7% of respondents estimate the neutral Fed Funds rate to be 2-3%

Recession

• 60.0% of respondents believe the U.S. will head into a shallow recession in 2024
• The majority of respondents (57.1%) are doubtful the Fed can navigate a soft-landing, followed by 35.7% somewhat confident

Full Report

Continue reading for all survey results, more charts and a reference guide on the U.S. economic landscape.

About This Report

The SIFMA Economist Roundtable brings together chief U.S. economists from over 20 global and regional financial institutions. SIFMA Research undergoes a semiannual U.S. Economic Survey with this group, analyzing the median economic forecasts of Roundtable members, published prior to the upcoming Federal Open Market Committee (FOMC) meetings in June and December. In those reports, we analyze the Economist Roundtable’s expectations for: GDP, unemployment, inflation, interest rates, etc. We also review expectations for policy moves at the upcoming FOMC meeting and discuss key macroeconomic topics and how these factors impact monetary policy.

Note: The survey was populated between November 6 to 22, 2023.

Credits

SIFMA Economist Roundtable Chair

• Lindsey Piegza, Ph.D, Stifel

SIFMA Economist Roundtable

• Torsten Slok, Apollo Global Management
• Michael Gapen, Bank of America
• Marc Giannoni, Barclays Capital
• Nathaniel Karp, BBVA Compass
• Mickey Levy, Berenberg
• Douglas Porter, BMO Financial
• Andrew Hollenhorst, Citigroup
• Nicholas Van Ness, Credit Agricole
• Nannette Hechler-Fayd’herbe, Credit Suisse
• Peter Hooper, Deutsche Bank Securities
• Christopher Low, FHN Financial
• Jan Hatzius, Goldman Sachs
• Michael Feroli, J.P. Morgan
• Thomas Mills, Jefferies
• Mark Zandi, Moody’s Analytics
• Ellen Zentner, Morgan Stanley
• Kevin Cummins, NatWest
• Lewis Alexander , Nomura
• Carl Tannenbaum, Northern Trust
• Augustine Faucher, PNC Financial
• Eugenio Alemán, Raymond James
• Stephen Gallagher, Société Générale
• Jonathan Pingle, UBS Securities
• Jay Bryson, Wells Fargo Securities

SIFMA

• Katie Kolchin, CFA, Managing Director & Head of Research
• Justyna Podziemska
• Dan Song

Related Resources

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  Inflation 101

  A hot topic in markets, we take a deeper look into inflation terminology, measurement, and historical trends.

Prior Surveys

• Report

  Economist Roundtable Flash Poll: 3Q23

• Report

  US Economic Survey, Mid-Year 2023

• Report

  US Economic Survey, end-Year 2022