Investing.com -- In a bold move, the Federal Reserve has slashed interest rates by 50 basis points, with analysts at Bank of America predicting further reductions later this year. The central bank's updated policy forecasts indicate a potential dip in the benchmark fed funds rate to 4.25% to 4.5% by the end of 2024, setting the stage for more rate cuts in the near future.
At a press conference, Fed Chair Jerome Powell emphasized the strength of the US economy and downplayed concerns about a recession. Despite this, the Fed is undergoing a "recalibration" of its rate policy, signaling a shift in its approach to monetary policy.
Bank of America analysts view the Fed's announcement as a "hawkish cut," suggesting that the central bank's outlook for rate cuts may not meet wider market expectations. However, they predict that the Fed will likely continue to reduce borrowing costs in order to support economic activity.
Looking ahead, the analysts anticipate another 75 basis points of cuts in the fourth quarter of this year, followed by 125 basis points of cuts in 2025, aiming for a neutral rate of 2.75-3%. This neutral rate is crucial in ensuring that borrowing costs neither hinder nor help economic growth.
In conclusion, investors should pay close attention to the Federal Reserve's future actions as they navigate the challenging economic landscape. By staying informed and adapting their investment strategies accordingly, individuals can position themselves for success in a changing market environment.