Bankers watch rate cuts and inflation in regional economic surveys – Duluth News Tribune

Nearly half of bankers recently surveyed in the Midwest and Prairie regions want the Federal Reserve to cut interest rates twice before the end of the year, and one leading economist believes their wish will come true.

About 48 percent of bankers who responded to Creighton University's Rural Mainstreet survey in July favored two rate cuts of a quarter of a percentage point and a half of a percentage point, respectively.

The country is “at a crossroads: Either we risk a severe recession by keeping interest rates in this range for too long just to achieve a certain rate of inflation,” said Don Reynolds, CEO of Regional Missouri Bank in Marceline, Missouri.

Creighton economist Ernie Goss, who oversees both the monthly survey and the monthly Mid-America Business Conditions survey, said the wholesale price index in the latter survey fell in July to levels that suggested easing inflation pressures.

“This is the fifth consecutive month that the inflation index has fallen,” he said. “The regional inflation gauge has clearly fallen into a range that suggests inflation pressures are approaching the Federal Reserve's target for the second half of 2024. Therefore, I expect the Fed to cut rates twice in the remaining months of 2024.”

The next meeting of the Federal Open Market Committee will be on September 17 and 18.

The two Creighton surveys serve as leading indicators of the economic situation in the Midwest and the Prairie region.

The Rural Mainstreet Index is based on a survey of rural bankers in Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming. It focuses on about 200 rural communities with an average population of 1,300 people.

The overall index fell below the growth-neutral level for the eleventh consecutive month in July, from 41.7 in June and 44.2 in May to 41.3. Any reading above 50 on the index, which ranges from 0 to 100, indicates economic growth in the coming months, while readings below 50 indicate contraction. Goss attributed the July figures to weak agricultural commodity prices, falling sales of farm equipment and declining agricultural exports.

The Mid-America study surveyed utility managers in Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota. The overall index was above the growth-neutral level in July for the fourth time this year, but fell slightly to 50.7 from 51.3 in June.

“The overall index, similar to the U.S. index, has been hovering around growth neutrality since December 2023,” Goss said. “In addition, utility managers remained pessimistic about the outlook for 2024, with only 11% expecting growth for the remainder of 2024.”

The Mid-America survey's six-month business confidence index fell to 30.6 from 34.2 in June.

The Rural Mainstreet Confidence Index fell to 28.3 from 29.2 in June, its lowest level this year.

The full Creighton reports can be found at bit.ly/3Y0SedN and bit.ly/3SavggB.

©2024 The Bismarck Tribune. Distributed by Tribune Content Agency, LLC.