From Morningstar:

The Federal Reserve decided not to change the federal funds rate at the latest meeting. Experts predict that rate cuts may begin in May, rather than March, based on Chair Jerome Powell’s remarks. The federal-funds rate currently stands at 5.25%-5.50%, and rates are considered “restrictive” at these levels. The aim is to reduce inflation and cool economic activity.

Core inflation has decreased year-on-year from a peak of 5.6% to 2.9%. Chair Jerome Powell noted that rate cuts will begin once there is “greater confidence that inflation is moving sustainably toward 2%.” While experts initially predicted a possible rate cut in March, Powell now suggests that March is not the committee’s base case.

Despite previous projections, it is now believed that rate cuts will likely begin in May. This is based on the assumption that core PCE inflation will hit 2.3% year-on-year by March, making a rate cut extremely likely in May. The year-end forecast for 2024 remains at 3.75%-4.00%.

Overall, the bond market and CME FedWatch Tool seem to align with the projections for future federal-funds rate targets, suggesting that May would be a likely time for rate cuts to begin.



Read more: US Interest Rates: Will the Fed Now Cut in May?