The U.S. Federal Reserve is determined not to reduce interest rates too soon \u2014 and some economists say recent data has pushed a summer cut completely off the table.<\/p>\n
Friday\u2019s\u00a0jobs report\u00a0reiterated the seemingly unwavering strength of the U.S. labor market and suggested\u00a0further need for Fed caution. All eyes will now be on Wednesday\u2019s consumer price index, after\u00a0February\u2019s annual inflation rate\u00a0of 3.2% came in slightly higher than expected.<\/p>\n
It comes as a growing number of market participants have raised the possibility of no rate cuts at all this year, including Minneapolis Fed President Neel Kashkari\u00a0who said\u00a0last week that no reductions were a possible scenario if inflation continued to move sideways.<\/p>\n
George Lagarias, chief economist at\u00a0Mazars, told CNBC on Monday that rate cuts in the summer were now looking much less likely.<\/p>\n
\u201cPersonally, I wouldn\u2019t be surprised if we saw less rate cuts and pushed more towards the end of the year,\u201d he told \u201cSquawk Box Europe\u201d on Monday.<\/p>\n
\u201cThis is a strong economy. Make no mistake, it is backed by debt and somewhat by overburdened credit cards, but it is a strong economy. So the Fed will struggle to find the case to cut rates soon.\u201d<\/p>\n
Market pricing reflects the ongoing uncertainty, with the probability of a rate cut now under 50% for both June and July, according to\u00a0the CME\u2019s FedWatch tool\u00a0\u2014 significantly lower than at the start of the month.<\/p>\n
\u201cThe Fed has been punishing itself ever since 2021 when \u2018team transitory\u2019 ostensibly got it wrong. \u2026 What they feel is that they can\u2019t get it wrong again, which means that they\u2019re more likely to err on the side of caution,\u201d Lagarias added.<\/p>\n
Despite this, he said it remains \u201cvery likely\u201d that there will be rate cuts this year.<\/p>\n
\u201cThey do have some room to cut, but they don\u2019t want to get it wrong. They do not want to be the Fed that cut rates as inflation kept beating expectations. So they want to see more data toward the right direction and they are willing to wait,\u201d Lagarias added.<\/p>\n
Speculation that there could be no interest rate reductions this year has been growing, although economists remain divided.<\/p>\n
Torsten Slok, chief economist at Apollo Global Management,\u00a0said last month\u00a0that he doesn\u2019t expect any cuts as the U.S. economy is \u201csimply not slowing down,\u201d and top U.S. asset manager Vanguard has\u00a0no rate reductions\u00a0as its base case for the year.<\/p>\n
Whereas former Federal Reserve Vice Chairman Roger Ferguson\u00a0told CNBC last week\u00a0he sees a 10%-15% chance of no cuts this year.<\/p>\n
Other analysts and economists are still backing the Fed\u2019s\u00a0own signaling in March\u00a0that it expects three quarter-percentage point cuts this year.<\/p>\n
Based on current growth and inflation forecasts, Goldman Sachs\u00a0Chief Economist Jan Hatzius\u00a0told CNBC on Friday\u00a0he would \u201cexpect some rate cuts based on what Chair Powell and other Fed officials have said.\u201d<\/p>\n
\u201cThe timing of that of course is going to depend on near-term data, on the reaction function from the Fed but under our forecast I would be quite surprised if we didn\u2019t get rate cuts this year. Quite surprised.\u201d<\/p>\n<\/p>\n
The U.S. Federal Reserve is determined not to reduce interest rates too soon \u2014 and some economists say recent data has pushed a summer cut completely off the table. Friday\u2019s\u00a0jobs report\u00a0reiterated the seemingly unwavering strength of the U.S. labor market and suggested\u00a0further need for Fed caution. All eyes will now be on Wednesday\u2019s consumer price […]<\/p>\n","protected":false},"author":0,"featured_media":2980,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-2979","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business"],"_links":{"self":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/2979","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/comments?post=2979"}],"version-history":[{"count":0,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/2979\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media\/2980"}],"wp:attachment":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media?parent=2979"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/categories?post=2979"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/tags?post=2979"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}