CUTTING BACK
Futures traders see almost no chance of a rate cut before September, according to data from CME Group.
In recent days, they have also sharply lowered their expectations of a September cut, assigning a probability of around 50 percent on Friday that the Fed would not start easing monetary policy before November.
This marks a dramatic shift from late last year, when the financial markets were pricing in as many as six interest rate cuts for 2024, with the first of them coming as early as March.
“At this juncture, there is little reason to think that the FOMC will prioritize downside risks to employment over the much more salient risk of sustained high inflation,” economists at Barclays wrote in a recent investor note.
“As such, this should keep rates on hold for the next few meetings as the FOMC awaits evidence that (will) restore its confidence that inflation is moving sustainably toward the 2 per centtarget,” they said, adding they still expect the Fed to make just one rate cut this year, most likely in December.
With the Fed almost certain to keep interest rates unchanged on Wednesday, analysts will closely scrutinize chair Powell’s press conference after the decision is announced for any indication of when the first cut could come.
But with the data still painting a mixed picture, he is unlikely to rock the boat too much this week, according to Oxford Economics chief US economist Ryan Sweet.
“Powell will stick with the Fed’s mantra that monetary policy is flexible and will respond as appropriate,” he wrote in a recent investor note. “Therefore, it would be surprising if his presser altered our subjective odds of a cut in September.”
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