WASHINGTON–When the Federal Reserve’s Open Markets Committee adjourns today after two days of meeting, market-watchers say not only is it almost guaranteed there will be no rate cut, but the meeting could include discussion of a potential rate increase.
That’s a far cry from just five months ago when most forecasts for 2024 expected inflation to continue to decline and the Fed to respond with three rate cuts.
The reason: as every credit union is aware, inflation has proven to be much more stubborn than anticipated, and the central bank has maintained the Fed funds rate at a range of 5.25% to 5.50%.
Persistently high inflation “is the new normal” that will keep the Fed on pause, Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, said in a research note that was cited by the New York Times.
Uncertainty in the Markets
According to the Times’ analysis, both the Fed and Wall Street are unsure what to make of the new normal, with discussion focused around what economists call a “neutral interest rate,” or a cost of lending that enables sustainable growth without causing inflation to spike.
Markets are now expecting a single rate cut in 2024, rather than three, and that may not occur until much later in the year than expected.
One Hawk’s View
But as the Times also noted, some hawks are suggesting a rate cut isn’t what’s needed at all. Raphael Bostic, president of the Atlanta Federal Reserve Bank, has warned that a rate increase cannot be ruled out “if inflation stalls out or even starts moving in the opposite direction, away from our target.”
Daily News Headlines. To Your Inbox. Every Day. And It’s Free
The biggest, best and freshest news reporting in credit unions remains free, and now has an added bonus---free shipping to your email address! That’s right. Each morning CUToday.info delivers its daily Fresh Today news update offering the latest headlines and breaking news right to your email, with the easy-to-read headlines format allowing you to click on the stories that interest you most in order to learn more. So stop paying those bank-fee-like subscription prices from other so-called “news” publications!
If you haven’t yet signed up for the new email solution on which CUToday.info has partnered with ResponseGenius, you can do so here. Signing up requires less than one minute of your time—and it’s free!
Please note that after signing up you may need to go to your Spam/Junk folder and mark the morning headlines email as safe. CUToday.info does not provide its list of readers and emails to outside parties, and we will not be contacting you to sell you an extended warranty or sending you any links so you may cash in on an inheritance.