The Federal Open Market Committee is expected to maintain interest rates at its next meeting on June 12, as progress on disinflation has stagnated from January to March 2024, according to government reports. However, the Federal Reserve is still anticipated to cut interest rates between one and three times in 2024, possibly due to inflation approaching the Fed’s 2% target or a potential softening of the job market.
The FOMC is closely monitoring upcoming economic data, with the release of Consumer Price Index inflation figures for April on May 15 being particularly crucial. Projections suggest a 0.4% increase in headline CPI inflation and a 0.3% rise excluding food and energy. While May’s CPI data may show a decline, current projections are not definitive as certain energy costs have decreased in May, although the trend may change
Aside from inflation, the FOMC is also paying attention to employment data as inflation remains subdued. Fed Chair Jerome Powell emphasized the importance of employment data as inflation eases, stating that the employment goal is now a focus as inflation has dipped below 3% on a 12-month basis. The April jobs report was weaker than expected, raising concerns about possible interest rate cuts to support the Fed’s full employment goal.
The expectation for interest rates in 2024 is that they will decrease, with the CME’s FedWatch Tool indicating a 10% chance of a rate cut in June, rising to 30% in July and higher in September. While there is a 10% chance that rates will not be cut in 2024, markets generally anticipate one to three rate cuts by December. FOMC policymakers will update their projections for year-end interest rates at the June 12 meeting, offering additional insights into potential rate cuts.
While it is unlikely that the FOMC will adjust interest rates at the upcoming meeting, economic data on inflation and jobs will play a significant role in future decisions. The Atlanta Fed’s Wage Growth Tracker shows wage growth at a 4.7% annual rate for March 2024, indicating potential pressure on inflation. Overall, the FOMC’s decision-making process regarding interest rates in 2024 will be influenced by incoming economic data and market expectations.
In conclusion, the FOMC is expected to keep interest rates steady at the June 12 meeting, but the possibility of one to three rate cuts in 2024 remains. With a focus on inflation and employment data, the Fed aims to navigate the economic landscape to achieve its goals of stable prices and full employment. The upcoming meeting will provide further clarity on the Fed’s stance on interest rates, with economic data playing a crucial role in shaping future decisions.
