FOMC meeting ahead: the Fed is expected to stay put
The Federal Open Market Committee (FOMC) of the Federal Reserve is expected to maintain its policy target interest rate range at a 23 year high of 5.25% -5.5% at its June meeting.
The Federal Reserve may lower or even completely erase its expectations for interest rate cuts in 2024.
Fed may lower 2024 rate cut forecast
The Federal Open Market Committee (FOMC) of the Federal Reserve is expected to maintain its policy target interest rate range at a 23 year high of 5.25% -5.5% at its June meeting. Since July 2023, this range has remained unchanged, reflecting that inflationary pressures have not eased in the past year.
Inflation reached a two-year low of 3% in June 2023, but then rebounded and reached 3.4% in April. A new report expected to be released on the same day as the Federal Reserve's interest rate decision may indicate the persistence of this stubborn phenomenon.
Meanwhile, the Federal Reserve is expected to reveal its latest views on economic growth, unemployment rate, inflation, and interest rates. At the end of last year, the Federal Reserve expected three interest rate cuts in 2024, but as inflation continues to persist, this expectation may be adjusted, with only two or even one rate cut remaining.
The reason for the rate cut is more important than time
Although investors and consumers are concerned about the timing of interest rate cuts, the reasons for the cuts are more important. The most ideal scenario is for inflation to gradually fall back to the Federal Reserve's 2% target without affecting the job market. However, if the economy deteriorates, the Federal Reserve may be forced to cut interest rates to cope with an economic slowdown, even if inflation remains higher than expected at this time.
FOMC worries about economic growth
Although economic growth may seem stable, some data shows potential issues. For example, data from the Ministry of Labor shows that the number of jobs has decreased by 8% since the beginning of this year, and the unemployment rate reached 4% in May, reaching a new high in two years. However, recruitment activities remain strong, and the unemployment rate remains at a historic low. The Federal Reserve estimates the long-term unemployment rate to be 4.1%.
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