Will the Federal Reserve (Fed) cut interest rates this year? Although the market still believes that the Fed maycut interest ratesThree more times starting in June, but as the US economy continues to expand vigorously and inflation remains stable, the possibility of not cutting interest rates at all has gradually increased and is no longer an unimaginable scenario.
Influential Fed Governor Waller said in a speech on the 27th that rising inflation data and strong employment growth as early as 2024 have made him more determined that the Fed is “in no rush” to lower interest rates.
The US dollar index (DXY), which tracks the greenback against a basket of currencies, rose in response, reaching its highest level in six weeks.
“It looks like his (Waller’s) outlook on the Fed’s easing cycle this year has changed to two rate cuts, and his message is that the rate cuts are short and long,” said Turner, ING’s head of global markets. It will happen later.”
Therefore, Turner believes that the US dollar may still have a high point, and the risk of the US dollar index rising above 104.50 and going straight to 105.00 has increased. The US dollar index rose 0.2% to 104.516.
Dow Jones reported that CME Group’s FedWatch website shows that as of today, traders in the interest rate futures market still expect the Fed to cut interest rates three times this year, which is presented in the Fed’s “dot chart.” In line with official forecasts. Interest rate cuts are expected to begin in June. The probability is still around 55%, although it has dropped from 70% last week. At the same time, traders believe there is less than a 1% chance the federal funds rate target range will remain unchanged at 5.25% to 5.5% through the end of 2024.
However, Smythe, chief economist at Virtus Investment Partners, said: “It is certainly possible that the Fed will not cut interest rates at all in 2024, which will happen unless inflation data over the next few months cooperates. “
Smythe estimated the probability of a “zero interest rate cut” this year at about 20%, but he believed the most likely scenario was still three rate cuts of 1 (0.25 percentage points) each time, starting in June. There is a cut.
“Although it is still far from the consensus forecast, after the March policy meeting, the idea of no interest rate cut in 2024 is gradually beginning to emerge, which will reflect on the Fed’s potential future interest rates,” said Parker, a senior Parker. The rate has become the edge of the path.” Portfolio Manager in Income Research + Management. Option. year and continue your current wait-and-see attitude.
Davis, global chief economist at Vanguard Group, said in a recent interview: “The Fed, when acting based on data, must consider an emerging and distinct risk: a no-landing economy or even “The danger of overheating the economy.”
Davis pointed out that the Fed may remember the lessons of the 1960s, when the Fed did not wait for the economy to cool before initiating a cycle of interest rate cuts. As a result, it later had to raise interest rates to prevent another surge in inflation. “If the Fed acts cautiously and does not want to raise interest rates in 2025, it may choose to leave interest rate cuts in 2024,” he said.
TS Lombard’s chief US economist Breeze said in an exclusive interview with CNBC on the 28th that he believes the probability of the Fed cutting interest rates only once or not even once this year “has become quite high “
Blitz said the market now expects the most likely time to start cutting interest rates is June, because “if there is no cut in June, the window of opportunity to cut interest rates after June has closed.” ” He told that the US presidential elections will be held in November. If the Fed wants to avoid criticism to support the re-election of (current President) Biden, it will not wait until the election, nor take any action when the economic recovery occurs. Performance is still very strong. Interest rates have been cut.
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