US Fed expected to keep rates on hold and debate timing of cuts
The US Federal Reserve could provide additional clues about how much it will cut interest rates this year, but it is almost certain to leave its key lending rate unchanged for the time being. Policymakers on the Fed’s rate-setting Federal Open Market Committee (FOMC) began their second day of deliberations in Washington, the Fed confirmed in a statement.
After the meeting concludes, the Fed will publish its interest rate decision, along with an updated summary of economic projections (SEP) that includes policymakers’ interest rate expectations for 2024 and beyond. The US central bank has lifted its key lending rate to a 23-year high of between 5.25 and 5.50 percent as part of a longrunning battle to bring high inflation back down firmly to its long-term target of two percent.
Last year, its policy proved to be a success: inflation eased dramatically from the multi-decade highs seen in 2022, while the United States was able to avoid a recession thanks to unexpectedly strong economic growth in quarter after quarter. But 2024 has been economists at Goldman Sachs wrote in more challenging for the Fed, with the a recent note to clients.
US seeing a small uptick in the pace of Futures traders currently assign a monthly inflation, renewing fears that probability of more than 60 percent that interest rates will have to remain high the Fed will start cutting interest rates for longer to bring prices under control. by mid-June, rising to almost 80 percent
“Since the start of this year, expectations by the end of July, according to about 2024 central bank easing CME Group data. “We expect a fairly have been pared back materially,” economists hawkish outcome,” Barclays economists at JP Morgan wrote in a recent wrote in a recent investor note, investor note. “But that has not disrupted predicting that policymakers on the the general trend toward an easing in Fed’s rate-setting Federal Open Market global financial conditions,” they added. Committee will roll back the number
Back in December, policymakers rate cuts from three to two. on the FOMC penciled in a median of However, although they expect the three 0.25 percentage point rate cuts number of cuts forecast to fall to two, the this year, raising hopes in the financial Barclays economists expect the Fed will markets that they could start as early as actually institute three cuts this year, March. But in the weeks that followed, leaving the interest rate 0.75 percent Fed officials used public appearances lower by the end of 2024 than it is today. to caution against moving too quickly “We retain our baseline call that and reigniting inflation, stressing that the FOMC will initiate a methodical, any decisions on rate cuts would be every-other meeting cutting cycle in “data-dependent.” June, continuing through 2025,” they
As a result, market expectations wrote. Economists at Goldman Sachs among traders, and many analysts, was now see the same number of cuts on pushed back from March to June, or the menu this year, after recently paring even later. “We continue to expect the back their forecast in an investor FOMC to leave the Fed funds rate note from four cuts in 2024 to just unchanged at the March meeting and three, “mainly because of the slightly to begin the easing cycle in June,” higher inflation path.”