Analysts expect Fed to keep rates unchanged, potential cuts in September and December

From Morningstar: 2024-07-30 04:51:00

Analysts expect the Federal Reserve to keep interest rates unchanged at its upcoming meeting, but many believe a rate cut may be coming in September and possibly December to stimulate the economy. The Fed’s focus has shifted from inflation to balancing low inflation and stable employment. Some argue for a rate cut sooner, while others caution against acting prematurely.

The Fed’s mandate is to maintain a healthy economy by adjusting the federal funds rate, which influences everything from Treasury yields to mortgage rates. The central bank faces a balancing act as job growth moderates and inflation remains a concern. The high rates have successfully reduced inflation from a peak of 9% to 3% in June but downside risks are being closely monitored.

Market expectations suggest interest rate cuts may begin in September, with a 90% probability of a 0.25% reduction. While some analysts argue for a July rate cut to avoid risks of rising inflation, others recommend waiting to assess how the economy responds. The impact of Fed policy changes can be slow and unpredictable, with lagged effects still impacting the economy.



Read more at Morningstar: Has the Fed Waited Too Long to Cut Rates?