Markets are anticipating that interest rates will remain steady at the Federal Open Market Committee’s next decision on May 1. Concerns have arisen from inflation data in early 2024, leading to doubts about the timing of reaching a 2% annual inflation rate. The possibility of an interest rate cut is being closely monitored, with speculation that it may occur at either the FOMC’s July or September meetings. This indicates that the Fed’s June meeting is unlikely to see any movement in interest rates, with the first potential rate cut expected to come at least a year after the final interest rate hike in July 2023.
An interest rate cut may be guided more by upcoming inflation releases than by statements from U.S. Federal Reserve officials, as FOMC members have outlined specific criteria they are looking for in inflation data before considering a rate cut. The timing of the May meeting is approaching, with the Fed scheduled to meet on April 30 to May 1 to announce their decision at 2:00 p.m. ET, followed by a press conference with Fed Chair Jerome Powell at 2:30 p.m. This will be the third meeting out of eight scheduled for 2024, with no update expected to the Summary of Economic Projections.
The consensus among FOMC policymakers was initially two or three interest rate cuts in 2024, as agreed upon during the March 20 update. However, concerns have arisen due to hotter than expected inflation data, leading to speculation of one or two rate cuts in 2024. Recent reports have shown a slight acceleration in inflation from January lows, raising questions about the Fed’s 2% annual inflation target. Additionally, a strong job market has reduced pressure on the Fed to hastily cut interest rates, as much of their analysis is dependent on economic data.
Expectations for near-term interest rate cuts have been dialed back by the Fed due to concerns over recent inflation reports in early 2024. Chair Powell may not have additional insight to provide beyond waiting for upcoming inflation releases and economic data. Despite hints from some FOMC policymakers that rates could potentially rise, Powell has emphasized that interest rates are likely at peak levels for the current interest rate cycle. The market will be looking for confirmation that interest rate cuts in 2024 are still anticipated, as well as reassurance that rates will not rise further. As of now, there is no clear evidence in recent macroeconomic releases to suggest a need for immediate interest rate cuts.
