Citi Economist: Fed Officials Are Very Worried About Whether Economy Softens Faster or Will Lead to Faster Rate Cuts

July 27 (Bloomberg) -- In the year since the Federal Reserve raised interest rates to more than 20-year highs, it has succeeded in cooling the overheated U.S. economy. But higher borrowing costs have also had some unintended effects. Higher-income households are benefiting from rising stock markets and home prices. Businesses are borrowing quickly and consumers are continuing to spend. But in other areas, a year of higher interest rates is finally starting to take its toll. Americans are taking longer to find jobs, and unemployment has risen. Small businesses are feeling the pain of rising loan costs. Low-income families are defaulting on auto loans and credit cards. Citigroup economist Veronica Clark said, “The economy has weakened over the past few months, and Fed officials are going to be very concerned about whether the economy starts to weaken more quickly. That will lead officials to cut rates even faster.”