From Morningstar: 2024-05-02 05:50:00

US interest rate cuts are delayed until at least September 2024 due to higher inflation, according to Federal Reserve Chair Powell. While markets expected cuts earlier in the year, recent data suggests a need for further progress in inflation reduction. The Fed also announced changes to quantitative tightening.

Inflation rose to 4.4% annualized in core PCE Price Index, delaying expected rate cuts. The Fed focuses on less volatile year-on-year data, showing inflation at 2.8%. Powell noted it will take longer than expected to gain confidence in progress. Markets shifted from three expected rate cuts to just one in 2024.

The Fed announced a reduction in Treasury sales from $60 billion to $25 billion per month, slowing quantitative tightening. Despite an uptick in first-quarter inflation, it is expected to normalize in 2024. Economic growth slowdown may prompt rate cuts, with a year-end 2026 target range of 1.75%-2.00%.



Read more at Morningstar: US Rate Cuts Are Far Off, But Fed Rules Out a Hike