The worst case scenario is that there is no interest rate cut, most likely the rate cut will be postponed until the autumn... Or the possibility of skipping 2024.

Greetings again everyone!

Today I am here with a long article. I will try to explain the expectations and reasons why US inflation is not decreasing. Let's start!

What's the latest situation?

Discussions about the persistence of inflation have also increased in the USA, during the period when we thought that the peak interest rate had reached the present day, by increasing the monetary tightening steps.

After starting the year with the pricing of 7 interest rate cuts, the expectation of interest rate cuts decreased to 2. In fact, there are many people who say that the FED will not reduce interest rates in 2024.

UBS, Switzerland's largest bank; He published a new report considering the possibility of the FED increasing interest rates and that this level of tightening might be insufficient!

So why isn't inflation decreasing in the USA?

- Even though the FED tries to break the labor market, it cannot. Unemployment is still very low.
- Economic activity is still active. A growth around 2% is expected for 2024. This is America's ideal growth. In order for inflation to decrease, more concessions must be made to growth.
- China's commodity demand, the increase in oil prices as a result of increased geopolitical risks, and OPEC + members supporting the price increase by reducing supply, keep global prices up.
- The US Treasury is giving more money to the market than the FED's balance sheet shrinkage, with intense spending and borrowing. Fiscal policy and monetary policy are not coordinated.
- There is no trust in the inflation announced by the USA. Each economic unit, where lower than expected inflation is declared, acts according to its own inflation expectations, and the monetary policy implemented by the FED according to the announced inflation does not manage the expectations in the market.

So what will #FED do?

It's too early to tell what will happen. #FOMC members will continue to follow the data. It would not be right to expect an interest rate cut from the FED unless inflation data are lower than expected, unemployment rates do not fall, retail and housing sales slow down, and growth figures are high.