Laffer Associates founder and Chairman Art Laffer reacts to potentially replacing Jerome Powell as Fed chair and discusses whether the Fed will cut interest rates in 2024 on ‘Making Money.’
Very few expect the Federal Reserve to cut interest rates on Wednesday. Instead, investors will parse Chairman Jerome Powell’s Fed speak to determine if they’ve got expectations right for the first rate cut, or if years of stubborn inflation will push potential cuts out even further.
“Our current expectation is for three rate cuts before year-end, with the first rate cut at the conclusion of the Federal Open Market Committee (FOMC) meeting on June 12, 2024,” Brian Rehling, head of fixed income strategy at Wells Fargo Investment Institute, wrote in a note to clients. “Inflation data would need to meaningful disappoint to change the timing of the Fed’s first rate cut,” he added.
Rehling, like other market participants tracked by the CME’s FedWatch Tool, had expected as many as six rate cuts at the start of the year, bringing the Federal funds rate to 4.6% by year’s end. This projection is expected to be updated on Wednesday.
FED SEES MORE RATE CUTS IN 2024
Inflation has not subsided as quickly as policymakers had expected. In February, consumer prices on an annual basis rose 3.2%, above economists’ projections, with prices for items like rent, beef and juices and drinks even higher at 5.8%, 9.2% and 27%, respectively. A separate report showed that producer prices rose 1.6% annually, also more than expected last month.
While consumer inflation is down from its peak of 9.1%, it remains above the Fed’s 2% mandate.
Lean ground beef for sale on the opening day of the new Walmart Neighborhood Market in Panorama City, California. (Robyn Beck/AFP/GettyImages / Getty Images)
Treasury Secretary Janet Yellen said in an exclusive interview with FOX Business last week that she regretted prior comments characterizing inflation as being “transitory” and while she noted prices are easing, the decline may not be “smooth.”
YELLEN: INFLATION DECLINE MAY NOT BE SMOOTH
“The Fed’s between a rock and a hard place. They gotta buy some time here so they can see more about the economy, about the inflation statistics before they have to decide to cut rates,” Bob Doll, Crossmark Global Investments CEO, said during an appearance on “The Claman Countdown.”
Federal Reserve Chair Jerome Powell speaks during a news conference on interest rates, the economy and monetary policy actions at the Federal Reserve Building in Washington, D.C., on June 15, 2022. (Olivier Douliery/AFP via Getty Images / Getty Images)
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The FOMC will announce the latest decision on interest rates at 2 p.m. ET on Wednesday, followed by Powell’s press conference at 2:30 p.m. ET.
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