2024 was supposed to be the year in which American consumers would enjoy some relief after more than 20 months of inflation and high borrowing costs.
Investors, economists and Federal Reserve officials said earlier that they expect the economy to decline this year, allowing interest rates to finally begin to be lowered, but those expectations for the Federal Reserve to lower interest rates have begun to decline.
Interest rate forecasts
While the markets were expecting six interest rate cuts during 2024 starting in March, this matter is now off the table.
In January, Fed Chairman Jerome Powell said about potential cuts, “I don’t think it’s likely that the committee will reach a level of confidence by the March meeting to identify this month as an appropriate time to do that.”
The tide has now turned so completely that some economists believe the Federal Reserve will not cut interest rates at all this year.
Apollo Global Management chief economist Torsten Slok said in a note to investors on Friday that the economy is not slowing down and some core inflation measures are growing.
“The Federal Reserve will not cut interest rates this year, and interest rates will remain high for a longer period,” Slouk added.
The same was confirmed by Richmond Federal Reserve Bank President Tom Barkin, saying that the Fed may not cut interest rates this year.
Barkin added in an interview with CNBC on Friday, “We will see… I still hope that inflation will decrease, and if it returns to normal, this justifies your desire to lower interest rates, but for me it starts with inflation.”
Inflation hinders rate cuts
Americans are suffering from rising prices due to inflation, especially for essentials such as rent and gas. Food prices rose by 0.4 percent between December and January, the highest monthly rate in a year.
For his part, corporate economist at Marine Federal Credit Union, Robert Frick, told CNN, “Food prices have continued to rise, and this is a real pain point.”
Standard & Poor’s economists expect real U.S. GDP to grow by 2.4 percent through 2024, up from their previous forecast of 1.5 percent in November, and the labor market remains incredibly resilient with unemployment rates at historic lows and inflation remaining high. Wages are high.
The latest data shows that the Fed’s preferred measure of inflation remains above its target in January.
There are other signs that inflation is not falling as much as the Federal Reserve expected, and small businesses expect to raise rates soon, according to a recent study by the National Federation of Independent Business.
When is the rate cut expected?
“The bottom line is that the Fed will spend most of 2024 fighting inflation,” Slok said, meaning interest rates will remain high.
However, about half of investors expect interest rates to be cut at the Fed’s June meeting, according to CME Group’s FedWatch tool, and most investors expect a cut by July.
Investors will be watching Powell closely for clues about interest rate cut expectations next week, when he testifies before the House Financial Services Committee and the Senate Banking Committee on Wednesday and Thursday, respectively.
2024-03-02 03:54:51
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