Fed rate hike: Moody’s Analytics chief economist has 'fingers crossed' for a pause

The US lawmakers passed the debt-ceiling deal on May 31, suspending the debt-ceiling limit through 2024

The US economy’s growth is well below its potential and may even stall, going by the business-to-business (B2B) sales data, chief economist at Moody’s Analytics Mark Zandi has said, batting for a rate-hike pause by the Federal Reserve.

The US central bank, which will meet on June 13 and 14, raised interest rates by 25 basis points in May, taking the rates to 5-5.25 percent. It was the tenth rate-hike since May 2022 in its battle against inflation. One basis point is one-hundredth of a percentage point.

“I’ve been monitoring the B2B sales data since the pandemic, and I’m increasingly of the mind it provides a timely, accurate read on the economy. And it’s currently telling a compelling story that the economy is growing well below its potential and even threatens to stall out,” Zandi tweeted.

“Another good reason why the Federal Reserve should pause its rate hikes at its upcoming meeting. Fingers crossed,” he added.

Now that the “debit limit drama” had passed, it was time for the US to focus on its economy, he said. The US lawmakers passed the debt-ceiling deal on May 31, suspending the debt-ceiling limit through 2024.

Also read: US Debt-ceiling deal: Could gold price appreciate by 25 percent?

“It’s thus time to turn back to taking the pulse of the fragile economy,” he tweeted.

“Company-level data Moody’s collects on business-to-business (B2B) sales signals a significant weakening in March/April. Yr-over-yr sales are down,” he added.

Though the numbers were weak across verticals, some sectors were doing worse than others, he said. “Sales are weak across lots of industries, with more than 1/2 experiencing B2B sales declines. Transportation, manufacturing, financial services and single family construction are weakest.  Professional and educational services, health care and recreation are holding up best,” he tweeted.

Also read: Senior Fed officials suggests skipping rate hikes next month

Zandi added a few caveats to the data he presented— seasonally adjusting was hard to get right given the pandemic swings in the data, B2B sales were nominal and not real dollar value and they estimated total B2B sales by weighting industry sales using their share of value added in the economy.