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Inflation Eases, Job Market Strong: Will the Fed Cut Rates in 2024?

source-logo  coinedition.com 16 July 2024 20:07, UTC

The CME “FedWatch” tool shows a 91.2% probability of the Federal Reserve maintaining current interest rates in August, with an 8.8% chance of a 25 basis point rate cut.

Meanwhile, the probability of the Fed keeping interest rates unchanged in September is 0%. Instead, there is an 85.7% likelihood of a cumulative 25 basis point rate cut. There’s also a 13.7% chance of a cumulative 50 basis point reduction, while a 75 basis point cut is considered highly unlikely, with only a 0.5% probability.

The Federal Reserve held rates steady in June, signaling that potential rate cuts might not occur until late December. Policymakers based this decision on the economic stability across key areas, particularly the growth and unemployment levels that currently exceed the U.S. central bank’s sustainability benchmark.

Fed Chair Jerome Powell stated that current rates would remain in place until the economy signals a need for change, either through a significant drop in inflation or a rise in the unemployment rate. He further highlighted that inflation had decreased without severely impacting the economy, suggesting this trend could continue.

Additionally, some Federal Reserve participants have pushed back their rate-cut expectations to 2025. The Fed’s Summary of Economic Projections, released last month, indicates four cuts projected for next year, with the benchmark rate potentially dropping to about 4.1% by the end of 2025. Powell said:

“Rate cuts that might have occurred this year take place next year. There are fewer rate cuts in the median this year, but one more next year. By year-end 2025 and 2026, you are almost exactly where you would have been — it’s just later.”

However, the latest projections suggest that while August is expected to see stable rates, September may introduce a shift in monetary policy, with varying degrees of rate cuts under consideration.

Disclaimer: The information presented in this article is for informational and educational purposes only. The article does not constitute financial advice or advice of any kind. Coin Edition is not responsible for any losses incurred as a result of the utilization of content, products, or services mentioned. Readers are advised to exercise caution before taking any action related to the company.

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