Traders in the fed funds futures space are pricing rate decreases to start in May 2024 and continue until the Fed has lopped off at least a full percentage point from the key rate before the end of the year, according to CME Group calculations. One immediate change to the chart will be the removal of a previously indicated rate increase this year.īeyond that, market pricing is aggressive. If there is a nod toward looming rate cuts, it will happen in the Fed's closely watched grid of individual members' expectations known as the "dot plot." Markets watch the "median dot," or the midpoint of all members' projections for the next three years as well as the longer term. … Powell is going to have to address that." The dot plot "But I wouldn't be surprised if there was, if not in the statement then during the presser, a bit of pushback on what has been a loosening of financial conditions. "A pause is all but guaranteed," said Liz Ann Sonders, chief investment strategist at Charles Schwab. Likewise, Goldman Sachs sees a possibility that the statement excludes a characterization regarding tighter financial conditions and possibly makes a few other small changes that had been used to convey a bias toward raising rates.įinancial conditions, a matrix of economic variables and stock market prices, have loosened considerably since the last Fed meeting concluded on Nov. There also could be some language tweaks on the committee's assessment of employment, inflation, housing and overall economic growth.įor instance, Bank of America thinks the committee might drop its reference to "additional policy firming" and simply say that it is committed to getting inflation back down to 2%. In its post-meeting communique, the rate-setting FOMC almost certainly will say that it is holding its benchmark overnight borrowing rate in a range between 5.25%-5.5%. Here's a quick rundown in what to expect: Chair Jerome Powell also will deliver his usual post-meeting news conference, where he either could discuss a strategy to ease policy now that inflation is decelerating, or continue to talk tough, an outcome that could rattle markets. That move to cuts, though likely expressed in a subtle way, would represent a major pivot for the Fed after 11 interest rate hikes.Īlong with an announcement on rates, the central bank also will update its projections on economic growth, inflation and unemployment. While acknowledging that future accelerations in inflation could force the Fed to raise rates further, "we think that a cooling economy is more likely and that the narrative should shift in the direction of cuts over hikes in 2024," Gapen added. economist at Bank of America, said in a client note. "This would be the third straight meeting where the Fed remained on hold and, in our view, means that the Fed likely sees itself as done with the hiking cycle," Michael Gapen, U.S. Personal Loans for 670 Credit Score or Lower Personal Loans for 580 Credit Score or Lower Best Debt Consolidation Loans for Bad Credit
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