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The vast majority of Wall Street economists expect the Federal Reserve to go ahead and raise borrowing costs at its policy meeting on Tuesday (Aug. 10) despite recent weak economic data, but a brave few are breaking with the consensus belief.
According to a report on Reuters, two well-regarded economists from Wrightson ICAP and Royal Bank of Scotland, said they predict the central bank will hold steady on interest rates until the doubts over the economic “soft patch” have lifted.
“It makes more sense to exercise caution when the economic uncertainty is greatest,” said Wrightson ICAP chief economist Lou Crandall.
“As a result, we think the Fed is likely to defer its next hike until a meeting where the economic outlook is less cloudy,” Crandall wrote in a note to clients.
Ram Bhagavatula, chief economist for North America at Royal Bank of Scotland in New York, agreed, noting that recent economic data has been worse than expected.
That outlook runs against the majority of Wall Street economists, who say the Fed will want to follow up its sole rate increase in June as part of its plan for a “measured” pace of tightening to get the 1.25 percent federal funds rate back to more normal levels.
On Friday, a discouraging increase of just 32,000 jobs to payrolls in July, the second weak month in a row, along with record crude oil prices was not enough to sway the top bond dealers on Wall Street.
A Reuters survey found all 20 economists still expected the Fed to push ahead with a quarter-point rate increase to 1.50 percent, despite the slowdown in hiring and consumer spending.