People are getting impatient with the Federal Reserve. For over a year, interest rates have been at their highest level in decades, making it more expensive to borrow money, take out a mortgage, and pay off debt. Now, the Fed is considering lowering these rates for the first time since the pandemic.
Fed Chair Jerome Powell hinted that a rate cut could happen in September, but he also emphasized that this isn’t certain. He said the economy needs to get closer to a point where reducing interest rates makes sense before the committee will consider it.
When will the Fed cut rates? It’s confirmed that there won’t be a rate cut before September 17-18, and the next meetings are in November and December. The likelihood of multiple cuts this year is decreasing, as the central bank would likely want to space out cuts over time to see how the economy evolves.
Some investors believe that the Fed will ignore the upcoming election and act in the best interest of the American economy regardless of timing. Rate cut probability indicates that many are convinced a rate cut will happen in September, with some even predicting a half-point cut.
The key factors for a September rate cut include: inflation moving down quickly or staying in line with expectations, economic growth remaining reasonably strong, and the labor market continuing on its current path. If any of these conditions change unexpectedly, it could cause officials to delay cutting rates.
While an unlikely scenario, it’s possible that the Fed won’t lower interest rates at all this year if inflation stays near target and other central banks have already started cutting.
Source: https://www.cnn.com/2024/08/01/economy/fed-rate-cut-when/index.html