The Federal Reserve is signaling a shift in monetary policy due to easing inflation.
They predict interest rate cuts in 2024, with further cuts in 2025 and 2026.
Despite efforts to temper expectations, traders are betting on aggressive rate cuts, with 88% of investors expecting a quarter-point cut in March. (Trending: Trump Releases Must-See TV Ad Ahead of 2024)
Inflation is slowing, leading to predictions of Fed rate cuts in 2024.
“We are seeing strong growth that appears to be moderating, we’re seeing a labor market that is coming back into balance by so many measures, and we’re seeing inflation making real progress,” Chair Jerome Powell said.
“These are the things we’ve been wanting to see. We still have a ways to go. No one is declaring victory. That would be premature, and we can’t be guaranteed of this progress.”
“We entered 2023 worried about inflation and how many more times the Fed was going to raise rates,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.
“But we are ending 2023 surprised at how low inflation has come down — especially as unemployment has remained so low — and are wondering how many times the Fed will cut.”
The rapid rise in interest rates has not hindered consumer spending or business hiring, and the labor market remains healthy.
“The cooler-than-expected PCE inflation readings pave the way for Fed rate cuts in 2024 — the question is the timing and depth,” said Kathy Bostjancic, Nationwide chief economist.
“We remain of the view that continued disinflation will continue, but we think the Fed will wait until May to start cutting rates.”
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