As Federal Reserve Chairman Powell is about to deliver a speech at the National Association for Business Economics (NABE) tonight, a professional survey conducted by the association shows that the Fed's mistake in setting interest rates in the final stages of the anti-inflation campaign is the main risk that may weaken economic growth momentum next year.

In a recent survey of 32 professional forecasters by NABE, 39% believe that 'monetary policy errors' are the 'biggest downside risk facing the US economy in the next 12 months', followed closely by 'US presidential election results' (23%) and 'Expansion of conflicts in the Middle East or Ukraine' (23%).

The results of this survey released on Sunday also show that respondents are highly concerned about the Fed's loose monetary policy, while hoping that the Fed can avoid a sharp increase in the unemployment rate as inflation steadily declines to the target level of 2%.

Founded in 1959, NABE is one of the member organizations of the American Economic Association. The mission of the association is to take a leading role in the use and understanding of economics. NABE has as many as 2,900 members and 44 chapters in the United States.

At 1:55 AM Beijing time on Tuesday afternoon at 13:55 Eastern Time on Monday, Federal Reserve Chairman Powell is scheduled to speak at NABE.

Currently, it is widely expected that Powell may take this opportunity to explain why the Fed decided to cut the benchmark interest rate by 50 basis points at the September 17-18 meeting, as well as the considerations behind the potential rate cuts for the remaining time this year and in 2025.

Looking at the smooth decision of the Fed to cut rates by 50 basis points in September with only one dissenting vote, it is undoubtedly that Chairman Powell's control within the Fed is strong. As speculated by industry insiders before, Powell is likely currently to be a 'dove' within the Fed.

Potomac River Capital founder Mark Spindel pointed out that the Fed chairman always has immense power. But Powell has been able to garner support from everyone other than Bowman, which is a complete victory, making him a more powerful chairman now.

Deutsche Bank's chief economist in the USA, Matthew Luzzetti, pointed out that given Powell's remarks at the Jackson Hole meeting and the information released at the press conference, he judged that if the labor market weakens further, Powell is likely to lean towards cutting rates by another 50 basis points.

According to the Chicago Mercantile Exchange's FedWatch Tool, the current interest rates futures market expects the Fed to cut rates again at the next interest rate meeting on November 6-7, with a probability of about 46% for a 25 basis point cut and 54% for a 50 basis point cut.

Concerns about the economic outlook.

Although Powell's speech is expected tonight, the latest NABE survey does not seem optimistic about the outlook for the US economy.

The survey shows that overall risks to the US economy are increasing, with 55% of surveyed economists believing that the likelihood of the economy underperforming expectations is higher, and Fed policy being the primary factor for a potential slowdown in the future US economy.

The median estimate of the survey indicates that the US economic growth rate next year is expected to slow from this year's expected 2.6% to 1.8%, the unemployment rate will rise from the current 4.2% to 4.4%, and the inflation rate will drop to 2.1%.

However, two-thirds of the respondents believe that the US will not experience an economic recession at least until 2026.

Such results are likely to be hailed by Powell and Fed officials as a textbook-style 'soft landing'. The Fed's most favored inflation indicator, the PCE price index, has now dropped from a peak of over 7% in 2022 to 2.2% last month, while the current United States has not yet experienced a significant economic recession or a sharp rise in unemployment rates. Although the unemployment rate has risen from its half-century low of 3.4% last year to 4.2%, it remains far below the average level of 5.7% since the late 1940s in the data of the US Bureau of Labor Statistics.

Of course, there is still a wide difference of opinion among interviewed economists on how the Fed will achieve the goal of a soft landing, highlighting their concerns about the Fed's capabilities. The Fed's upcoming tasks are extremely challenging: it must avoid excessively tight borrowing costs and financial conditions that could unnecessarily burden the economy; and it must also avoid excessive looseness that could lead to inflation rebound.

Surveys show that only one-third of the surveyed economic data believe that the current policy interest rate is 'just right'. Another third believe that the current rate should be below 4.75%, and 30% believe that the rate should be 5% or higher.

Among the mentioned other risks, there is also disagreement among respondents on which type of election outcome poses a greater threat to the economy. If control of Congress and the White House is in the hands of either party, it can facilitate decision-making on issues such as debt ceiling cancellation or budget setting, but it can also give the president more leeway to fulfill campaign promises, such as tax cuts or trade barrier policies.

As a negative risk, 13% of respondents believe that a Republican sweep of the White House and Congress would be a threat, while 10% believe that a Democratic sweep of the government and legislature would be a threat. In contrast, only 7% of respondents believe that a decisive victory by either the Democratic or Republican party in the election would be positive.

Additionally, 17% of respondents believe that government division will bring downside risks, while 13% of respondents believe that government division will bring upside risks.

Editor/Rocky