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May 13, 2024 · Updated 2:06 AM PDT, May 13, 2024. WASHINGTON (AP) — The sharp interest rate hikes of the past two years will likely take longer than previously expected to bring down inflation, several Federal Reserve officials have said in recent comments, suggesting there may be few, if any, rate cuts this year.
Apr 30, 2024 · The Federal Reserve left its key interest rate unchanged at between 5.25% and 5.5% — the highest level in more than a decade — as annual inflation rates continued to stall.
Apr 23, 2024 · The U.S. Federal Reserve will wait until September to cut its key interest rate, according to a majority of 100 economists polled by Reuters, with half saying there will be only two cuts this...
- Overview
- When will the first cut happen?
- What does this mean for your money?
A top question on the minds of investors and consumers alike is when might the Federal Reserve make its first interest rate cut after two years of rapid hikes, which have sent mortgage and credit card rates soaring. But after Tuesday's hotter-than-forecast inflation report, economists have a partial answer: Expect to wait longer.
Even before Tuesday's inflation data, the Federal Reserve had signaled that it would take a cautious approach. Fed chair Jerome Powell told CBS News' "60 Minutes" earlier this month that the central bank wants to have more confidence that inflation is receding "before we take that very important step of beginning to cut interest rates."
The Federal Reserve began hiking rates in March 2022 to battle red-hot inflation, relying on an effective tool to depress consumer spending and tamp down price increases. The central bank's 11 rate hikes since then have helped bring down the annual inflation rate to 3.1% in January from a high of 9.1% in June 2022, but January's number was higher than economists had projected — and remains above the Fed's goal of driving inflation down to 2%.
The Fed is "being very cautious when it comes to its decision making regarding rate cuts," noted Jacob Channel, an economist at LendingTree, in an email. "The reason for this is because they don't want to start cutting prematurely and end up making inflation worse."
Economists have revised their forecasts following Tuesday's sticky inflation report, with many of them now projecting the Fed's first cut will come later in 2024 than they had earlier forecast. In other words, don't hold your breath for a cut at either of its next two meetings, in March and May.
Earlier in the year, most economists pegged the first rate cut of 2024 for the Fed's March 20 meeting. But as of Wednesday, only 1 in 10 continued to forecast a March rate cut.
"The initial market reaction sent expectations for a March rate cut to a below 10% probability — quite a shift after starting the year at 80%," PNC Bank said in a Tuesday investment note.
Likewise, fewer economists are now predicting that the Fed will cut rates at its May 1 meeting. Currently, about one-third are still penciling in a May rate reduction, down from 90% earlier this year.
Instead, you'll most likely need to wait until the Fed's June 12 meeting to see the first rate cut, according to economists polled by FactSet.
"In our view, expectations for rate cuts are, and have been, too aggressive. Our base case does not anticipate rate cuts until closer to mid-year," PNC noted.
With economists pushing back their rate-cut forecasts to mid-2024, the initial impact was on the stock market, with the Dow Jones Industrial Average falling 525 points, or 1.4%, on Tuesday.
Investors had been pushing stocks higher on expectations that the Fed would soon cut rates, which could lower costs for businesses and spur consumers to spend more — potentially juicing corporate profits.
See Managing Your Money for more information on mortgage rates
•What the latest inflation numbers mean for mortgage rates
•Is a 1% drop in mortgage rates worth refinancing? Experts weigh in
•Why some experts say you shouldn't wait for mortgage rates to fall
May 2, 2024 · When Will the Fed Lower Interest Rates? We expect the Fed to start cutting rates beginning with FOMC’s July 2024 meeting.
- Preston Caldwell
- 6 min
Apr 26, 2024 · At the start of 2024, investors expected the Federal Reserve to cut interest rates substantially this year as inflation cooled. But price increases have been surprisingly stubborn, and that is...
Dec 19, 2023 · While most officials believe there will be a total of three rate cuts in 2024, one Fed official is penciling in five. Exhilarated by these new foretellings, investors sent markets soaring,...
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related to: Will the Fed cut interest rates in 2024?See the Best Banks with the Best Rates for High Yield Savings Accounts. See the Nation's Top Bank Savings and Money Market Accounts
depositaccounts.com has been visited by 100K+ users in the past month
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