Will the Fed cut rates at some point in 2024? This is what the experts say

Another month, another meeting, no change. The latest Federal Reserve meeting has once again resulted in no change to interest rates. Describing the economic outlook as “uncertain”, the statement noted how it expects there to be only two rate cuts this year.

Experts had thought that this year would see interest rates slashed after two years of rises.

Majority Expects Rate Cuts in Second Half of 2024

According to a Reuters poll of 116 economists conducted in late May and early June, nearly two-thirds (74 out of 116) forecast the Fed’s first rate cut to occur in September 2024.

Additionally, around 60% (68 out of 116) predicted two quarter-point rate cuts this year, with the second reduction likely happening in December.

However, the path to rate cuts is not without obstacles. Inflation, particularly the Personal Consumption Expenditures (PCE) price index, remains elevated, and none of the inflation measures are expected to reach the Fed’s 2% target until at least 2026.

This persistent inflation has led some Fed officials to express reluctance about lowering interest rates too soon.

“The Fed will be raising its inflation forecast at the June meeting and...it would look odd to raise your inflation forecast and then cut rates quickly after that,” Michael Gapen, chief US economist at Bank of America, who expects just one cut this year in December. “So, the next move is a cut. But I think the primary risk to our baseline is the Fed just doesn’t cut...and the labor market doesn’t look all that weak to me right now.”

If the Fed does cut rates later this year, it would provide relief for consumers grappling with high borrowing costs. Mortgage rates, which are influenced by the Fed’s actions, could potentially decline from their current levels around 7%.