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Home ยป Fed Meeting on May 1: What to Expect from the Next Fed Meeting
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Fed Meeting on May 1: What to Expect from the Next Fed Meeting

EditorEditorApril 30, 20243 Mins Read
Fed Meeting on May 1
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Economists hope the Federal Reserve will signal its first interest rate cut in 40 years at the Fed meeting on 1st May. This decision in May 2024 is intended to fight inflation. However, recent data has challenged these expectations.

Challenges for the Fed

The Federal Open Market Committee (FOMC) has faced challenges in the past three months. By the end of 2023, there was hope for a smoother economic transition with slowing inflation and steady job growth. Yet, the latest data shows that consumer prices are exceeding expectations once more, which might influence the Fed Meeting in May 2024. This is despite slower economic growth in the first quarter of 2024, which affected the Fed Meeting on 1 May.

According to Bureau of Labor Statistics data, inflation could reach 4.5% by March 2025 if current trends continue for a year. This is due to increased energy prices and higher costs for shelter, medical care, and insurance. It is more than double the Fed’s 2% target and up from 1.9% just four months ago, making it possible for it to affect the Fed Meeting on 1 May.

Similarly, the Fed’s preferred inflation gauge from the Department of Commerce shows prices, excluding food and energy, rising at a 3.7% annualized rate in the first quarter of 2024. This follows two quarters in which they matched the Fed’s 2% target.

All About Fed Meeting on May 1

Economists are now questioning whether the Fed Meeting in May 2024 will show any possibility of future cut rates as previously expected. Some even suggest the possibility of rate hikes being discussed at the next Fed meeting. The uncertainty stems from recent data showing slowing growth and rising inflation.

While many economists are still looking forward to rate cuts, they also believe that the economic landscape may change by September. They believe that it could delay any rate adjustments.

Previously, the Fed focused heavily on reducing high inflation. However, recent data showing a decline in inflation alongside stable unemployment rates has changed its views. This change suggests a more balanced approach to the Fed’s dual mandate of managing inflation and unemployment.

The Reasons Behind the High Inflation

Economists believe there are many reasons why inflation is around 3%. Energy price increases due to supply disruptions in the Middle East contributed to a fifth of the price increase from February to March.

To understand inflation, economists track a core price index, which has remained steady at 3.8% since February after declining from 5.6% in January 2023. Moreover, increasing housing costs and car insurance premiums are also affecting inflation. Rent increases have slowed while car insurers adjust premiums to cover higher medical and repair expenses. These points might be discussed in the upcoming Fed Meeting on 1st May.

Some economists suggest that inflation may only reach the Fed’s 2% target at the end of 2025 or later. Delaying rate cuts allows the Fed to assess whether inflation is stabilizing or continuing to rise.

Read Also:

PCE Price Index March 2024: All You Need to Know About the Inflation Report

US GDP in Q1 2024 Growth Slowed to a 1.6%

Mortgage Demand in the US Decreases as Mortgage Rates Increase

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