FED Meeting: Will Interest Rates Drop?

Politics03/19/2024Mr. SmithMr. Smith
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Americans are feeling the pinch of higher costs across various loan types, including mortgages and credit cards, following two years of Federal Reserve interest rate hikes. As the central bank convenes this week, both economists and consumers are eager to know: Will the Fed start cutting rates?

The answer isn't likely to be affirmative this month or even at the upcoming meeting, according to forecasts from Wall Street analysts.

Most economists surveyed by financial data firm FactSet anticipate that the Fed will maintain its benchmark rate at the current level during the March meeting, as well as at the subsequent meeting on May 1. Those hoping for lower borrowing expenses may need to wait until June, as approximately half of economists now project the Fed's first rate cut in four years to occur during the June 12 meeting, according to FactSet.

The Fed initiated its series of rate hikes in March 2022 amid surging inflation during the pandemic, which reached a 40-year peak in June of that year. While inflation has moderated since then, it remains above the Fed's preferred level, leading economists to expect a stable rate decision this week.

However, this doesn't mean that the Fed's announcements won't be significant. Observers suggest that the Fed's economic outlook in the coming days may provide clues about potential rate adjustments.

Sam Millete, director of fixed income at Commonwealth Financial Network, commented, "The Fed's March meeting will be closely watched as they address recent economic data. It will be intriguing to see their stance, particularly in Fed Chair Jerome Powell's post-meeting press conference."

Key Details About the Fed Meeting

When is the Fed meeting this week?

The Federal Reserve's Open Market Committee is scheduled to meet on March 19-20. The rate-setting panel will announce its decision at 2 p.m. Eastern time on March 20.

Chairman Jerome Powell will host a press conference at 2:30 p.m. on Wednesday to discuss the FOMC's decision and provide insights into the central bank's outlook.

When and by how much will the Fed cut interest rates?

The Fed is expected to maintain the federal funds rate within a range of 5.25% to 5.5% during the upcoming meeting.

Analysts are keen to learn whether the central bank will offer guidance on the timing of its first rate cut since March 2020, when rates were reduced to support the economy during the pandemic.

Expectations for Rate Cuts in 2024

Economists anticipate that the Fed could implement multiple rate cuts in 2024, although projections have been revised downward by some analysts due to persistent inflation. Goldman Sachs, for instance, has adjusted its forecast from four cuts to three this year.

Inflation Trends

In February, consumer prices rose by 3.2% annually, surpassing January's pace of 3.1% and exceeding the Fed's 2% target. Although inflation has moderated from its peak, it remains elevated, prompting economists to anticipate rate cuts no earlier than June.

Fed's Cautionary Stance

Fed Chair Jerome Powell has emphasized the need for sustained progress in addressing inflation before considering rate cuts. The Fed aims to avoid premature rate adjustments that could reignite inflationary pressures, leading to economic challenges.

Impact on Borrowing Costs

If the Fed maintains rates, borrowing expenses will continue to be significant for consumers, affecting credit cards, auto loans, and mortgages. On the positive side, savers may benefit from attractive returns in high-yield savings accounts or CDs.

For more information on related topics, consider exploring: APRNEWS/STOCKS | APRNEWS/SPORTS | APRNEWS/POLITICS

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