Fed cuts continue in a "when" scenario, but not "if there will be"
eToro commentary on yesterday's Federal Reserve press conference. “Fed rate cuts remain a “when” scenario, not an “if” scenario, and that is clear from the latest update to the Fed's dot plot and Chairman Powell's press conference.” , emphasizes Bret Kenwell, investment analyst in the US.
Fed rate cuts remain a "when" scenario, not an "if" scenario, and that's clear from the latest update to the Fed's dot plot and Chairman Powell's press conference.
The committee now expects fewer rate cuts in 2024 compared to what they forecast three months ago, but more rate cuts in 2025. That doesn't change whether the Fed will cut, just when it expects to cut.
Referring to the Fed's latest dot plot update, Chairman Powell spoke of using a fairly conservative forecast and that the committee would be willing to change its outlook if the data warrants it. At the end of the day, the Fed is not seeking tighter monetary policy - that is, higher rates - but rather studying when it will be appropriate to lower rates, reiterating the reality of "when, not if."
The latest update also underlines that the Fed does not feel pressure to lower rates, as other G7 central banks (such as the BoC and ECB) have done recently.
Regarding the Fed's 2% inflation target, keep in mind that for years the Fed struggled to get inflation to 2%. Now he is trying to get it back to 2%. As long as the economy continues to move forward, the 2% rate is not the end-all, be-all for investors.
