Fri. Jul 26th, 2024

When will lower interest rates happen in 2024? Where to look, according to economists.

By 37ci3 Feb2,2024



A report of explosive cases is shown on Friday 353,000 jobs were added in January Against expectations for 185,000 jobs, it is another signal that the US economy remains strong.

But this good news likely confirms the view that policymakers at the Federal Reserve are in no rush to cut interest rates, meaning that there are borrowing costs for consumers – maybe to buy a car or a house – will probably stay high for a while.

Earlier this week Fed announced The current federal funds rate, which helps set interest rates for loans across the economy, was left unchanged at 5.25% to 5.5%.

Speaking after the announcement, Fed Chairman Jerome Powell said he thought the first post-pandemic rate cut would happen in March, as some investors had hoped. According to him, inflation remains very hot – even 3.4%. The Central Bank wants to reduce it again to 2%.

“We are prepared to maintain the current target range for the federal funds rate for longer if available,” he said, referring to a range of 5.25% to 5.5%.

What do economists say?

In a note to clients after Friday’s jobs report, Seema Shah, chief global strategist at Principal Asset Management, said the data was “absolutely no sign of labor market softening or wage pressures easing.” thousands of layoffs in industries like technology and the media other business sectors are still strong lately.

As a result, predicting that the March interest rate cut is off the table, Shah said that the cut in May, when the Federal Open Market Committee will make the third interest rate decision of the year, is now “on ice”.

“Certainly with these kinds of numbers,” he said, referring to Friday’s jobs report, “the six or seven percent discount that the markets are pricing in seems very offside.”

After the release of the jobs report on Friday, financial market traders raised the possibility that the Fed will keep its current rate from May. only 6% – 27%the probability that the current exchange rate will remain the same until March increased from 62% to 80%.

The latest jobs data was not without some red flags for monetary policymakers. One is an acceleration in average hourly earnings without a corresponding change in hours worked.

If these trends continue, it could even be a sign of stagflation: higher prices but slower economic growth.

“It would be nice if inflation hit the target,” Sean Snaith, an economist at the University of Central Florida, said in a note on Friday. “But now it means that the Fed’s current has and will continue to tighten. While inflation has fallen sharply since peaking at 9.1% in June 2022, it has remained stubbornly in the 3% range for the past 7 months.

The job report also noted a continued trend in low survey response rates, as well as the effects of severe winter weather, both of which could have skewed the numbers slightly.

Still, the consensus among economic analysts is that higher interest rates are here to stay for now.

“A stronger-than-expected January jobs report, including upward revisions to previous months’ job growth and strong wage growth, reduced the likelihood of a near-term cut in the federal funds rate,” said Gus Faucher, chief economist at PNC. In a note to clients on Friday.

“Committee members will be concerned that strong job and wage growth in late 2023 and early 2024 could reignite inflationary pressures in the U.S. economy,” the Federal Open Markets said.

The upshot of all this: there is unlikely to be any significant change in borrowing rates anytime soon.



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By 37ci3

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