Federal Reserve Chair Jerome Powell hinted at the possibility of Fed rate cuts in 2024 at an event on Tuesday. He believes that rate cuts in 2024 might not happen as soon as investors hoped due to high inflation.
Blake Gwinn, head of US rates strategy at RBC Capital Markets, agrees with this assessment. He recently revised his expectations of rate cuts from three to just one in December. Gwinn points out that Fedspeak has shifted in recent weeks, with officials no longer seeing January’s high inflation report as a one-time occurrence.
As for the possibility of a rate hike, Gwinn believes the bar for the Fed rate cuts to increase is very high. He added that he believes the markets are not seriously considering this idea.
Fed Rate Cuts in 2024
In the interview regarding rate cuts in 2024, Blake Gwinn, the head of US rates strategy at RBC Capital Markets, discussed several key points. Gwinn said that since the March Consumer Price Index (CPI) print, there has been a shift from various Fed speakers. This shift includes Collins, Daly, and Jefferson, who have backed away from the idea of the inflation spike being just a temporary bump in the road.
This change in the viewpoints out the possibility of Fed rate cuts in 2024 being delayed. Gwinn also said that the timing of rate cuts in 2024 could be affected by political factors. He mentioned that starting to introduce rate cuts in the middle of the election cycle could bring heat onto the Fed.
This decision about Fed rate cuts in 2024 will not have anything positive, especially since the rate cuts were seen as preventative action.
Moreover, during a panel discussion with Bank of Canada Governor Tiff Macklem, Powell said that recent data have not increased the confidence of the Federal Reserve to decide the date to introduce Fed rate cuts.
This shows they might take longer than anticipated to regain that confidence. He added that due to the strong labor market and progress on inflation, it is suitable to let the current policy continue working and base decisions on evolving data and outlook.
So When Will the Rate Cuts in 2024 Happen?
There was a discussion on the effectiveness of the Fed’s current policy stance, considering that previous rate hikes might not have had the expected impact due to various factors related to the pandemic.
Gwinn said that a recently released article discussed how rate hikes had not worked as expected because of factors like fiscal support, businesses reducing exposure to interest rates, and ongoing stimulative fiscal policy.
Gwinn said that the level for another rate hike was very high and not heavily priced into markets. In the interview, Blake Gwinn said that he expects Fed rate cuts in 2024 to happen in December.
He said that Fed rate cuts in the middle of the election could attract unwanted attention to the Federal Reserve. Therefore, he suggests that December would be a more appropriate time for Fed rate cuts in 2024.
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