🔥 Premium AI-powered Stock Picks from InvestingPro Now up to 50% OffCLAIM SALE

US Fed Expected to Maintain High Interest Rates Today, Signal Fewer Cuts in 2024

Published 12-06-2024, 04:48 pm

The Federal Reserve is poised to keep interest rates at their highest level in 23 years for the seventh consecutive meeting on Wednesday, with signals suggesting fewer rate cuts this year than previously anticipated. Investors and market watchers will be closely scrutinizing the Fed’s latest economic forecasts, particularly the "dot plot," which outlines policymakers’ rate projections. Economists now expect the Fed to indicate one or two rate cuts this year, down from the three predicted in March.

Inflation trends will be a key factor in the Fed’s decision-making process. After a stall in the first quarter, inflation moderated again in April 2024, renewing hopes for rate cuts. However, the Fed needs further confirmation that inflation is on a sustained downward path before easing borrowing costs. The Labor Department’s Consumer Price Index (CPI) for May, set to be released Wednesday morning, will be critical in this regard.

Offer:Unlock the full potential of your portfolio with InvestingPro by clicking here, and take advantage of the limited-time 69% discount! Hurry up to grab your offer today!

Fed Chair Jerome Powell’s post-meeting press conference will be closely watched for hints about future policy directions. Powell is expected to emphasize the Fed’s patient approach, awaiting solid data to ensure inflation is moving toward the 2% target before considering rate cuts. The robust job market, reflected in recent employment figures, supports this cautious stance.

In contrast to the Fed’s steady approach, other central banks like the European Central Bank and the Bank of Canada have already begun lowering rates. Wall Street's consensus is currently betting on a September rate cut, though Powell’s annual speech at the Jackson Hole symposium in August may provide further insights.

New York Fed President John Williams recently stated there is no urgency to cut rates immediately, highlighting that the current policy is effective and adjustments will be made as the economic outlook evolves. Similarly, Minneapolis Fed President Neel Kashkari has indicated that rate cuts will likely be limited to one or two this year.

The timing of the Fed’s rate cuts is crucial, balancing the risk of reigniting inflation if cuts come too soon against the danger of recession if rates remain too high for too long. The U.S. economy, while healthy by several measures, shows signs of strain with elevated inflation, rising debt levels, and dwindling pandemic-era savings. Consumer spending has slowed, and retailers report shifts in purchasing behavior.

Projections for unemployment might be revised upward as the current 4% jobless rate matches the Fed’s median forecast for 2024. Despite a weaker-than-expected April jobs report, overall data suggests it was an anomaly rather than the start of a new trend.

Economists generally predict further cooling in both the broader economy and job market in the second half of the year, which could pave the way for lower interest rates. However, the Fed remains unsatisfied with the current inflation rate, which stood at 2.7% in April 2024. Powell has stressed the need for inflation to hit the 2% target consistently. One persistent driver of inflation is shelter costs, a significant component of the CPI and Personal Consumption Expenditures (PCE) price index. Wednesday’s CPI report will be pivotal in assessing progress in this area.

Click here and don't miss out on this exclusive offer to access premium features of InvestingPro, including the powerful screeners, fair value calculator, financial health check, etc. and embark on your journey towards financial success. And the best part? It is currently available at a 69% discount, for just INR 216/month.

Read More: Breakout: Stock Jumps 13%, Trying to Fill the Gap!

X (formerly, Twitter) - Aayush Khanna

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.