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Are Fed Rate Cuts Off the Table?
Analysts are now discussing no cuts in 2024... we give you our take
Ayesha Tariq
March 05, 2024
Yesterday, the Fed’s Raphael Bostic (voter) came out with some glaring statements on the Fed cutting too early.
The biggest statement from Bostic, a known dove, is that the Fed may cut twice with a pause in between - this leads to a 25 bps cut once in the third quarter, pause, and one more time towards the end of the year.
This is the first of the Fed voting members to come and reduce the number of cuts for the year. Thus far, we’ve been hanging on to three cuts at a minimum and the market is also pricing in about 75bps of cuts for 2024, starting in July.
"I need to see more progress to feel fully confident that inflation is on a sure path to averaging 2% over time...Only when I gain that confidence will I feel the time is right to begin lowering the federal funds rate"
The gist of the discussion was that rate cuts could fuel new demand and inflation, something we are already seeing.
"Many executives tell us they are on pause, ready to deploy assets and ramp up hiring when the time is right. If that scenario were to unfold on a large scale, it holds the potential to unleash a burst of new demand...This threat of what I’ll call pent-up exuberance is a new upside risk that I think bears scrutiny in coming months."
Given these statements and what we’re seeing in macro conditions, we’re hearing increasing debates around the Fed not cutting at all this year.
Let’s take a look at what’s driving this narrative and what we foresee happening.
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