Let’s take a look at where the Fed is currently with interest rates. Currently, the target range for the federal funds rate is 5.25% to 5.50%. This interest rate level has been maintained for several months and has had a large impact on the market.
However, the market expects the Fed to cut interest rates before the end of 2024. Why is this so? There are two main reasons:
1. Inflation rate falls. Inflation data in recent months suggest that inflation is slowing significantly. If this trend continues, the Fed may decide that the economy is strong enough to withstand lower interest rates.
2. Economic growth slows down. Although the economy is still growing, the rate of growth is slowing down. If economic growth continues to slow, the Fed may consider cutting interest rates to stimulate the economy.
However, if inflation continues to decline and economic growth slows, the likelihood of the Fed cutting interest rates before the end of 2024 is very real.