World's Best Investment Manager Predicts U.S. Federal Reserve to Cut Interest Rates at Remaining 2024 Meetings
According to a recent poll of economists by Multibagger, the U.S. Federal Reserve is expected to cut interest rates by 25 basis points at each of the remaining three meetings of 2024. This is one more reduction than previously predicted, as a recession is unlikely.
The change in Fed rate cut calls comes after a weaker-than-expected July U.S. jobs report and a brief market sell-off. Interest rate futures traders initially priced in up to 120 basis points of reductions for 2024, but that has now reduced to around 100 basis points.
Most economists in the poll do not expect a rapid series of rate cuts, despite some Fed officials hinting at them. Recent data, such as a strong retail sales report, suggests that the economy is performing relatively well and inflation is receding.
It is predicted that the U.S. central bank will cut the federal funds rate by 25 basis points in September, November, and December, with the range reaching 4.50%-4.75% by the end of 2024.
Markets are currently pricing in a 70% probability of a quarter percentage point cut in September, down from earlier expectations of a half-percentage-point cut.
Analysts believe that inflation is the main reason for the expected rate cuts, as the economy remains resilient and is growing near trend. The labor market is also holding up well, with wage growth remaining above the 3.0%-3.5% range consistent with the Fed's 2% inflation target.
Despite the easing measures, inflation is expected to stay above 2% until at least 2026. The unemployment rate is forecast to remain around 4.3% through 2026, with the economy expected to expand at around its trend growth rate until 2027.
The likelihood of a recession is currently estimated at just 30%, with economists not seeing a significant downturn in activity that would prompt large rate cuts from the Fed.
Investors and economists will be closely watching Fed Chair Jerome Powell's remarks on the economic outlook at the annual economic symposium in Jackson Hole, Wyoming, to gain further insights into the Fed's future actions.
Overall, the predicted rate cuts by the U.S. Federal Reserve are expected to support economic growth and maintain stability in the market. Investors should monitor these developments closely to make informed decisions about their finances and investments.