FX168 Financial News (North America) News When reviewing the latest inflation data, Fed policymakers found that there was almost nothing that would stimulate a sense of urgency to cut interest rates, yet nothing ruled out the possibility of starting to cut interest rates later this year. #2024宏观展望 # #美联储政策转向 #
This is the opinion of financial markets and analysts. After analyzing a government report on Friday (April 26), they said that last month's rise in inflation was basically in line with economists' expectations, and was also in line with the expectations expressed by the Federal Reserve officials themselves.
The year-on-year increase in the personal consumption expenditure (PCE) price index adjusted by the Federal Reserve at a rate of 2% accelerated to 2.7% in March from 2.5% in February. The core PCE, or measure of underlying inflation, is the same as the February data, which is 2.8%.
Inflation Insights analyst Omair Shariff pointed out that Thursday's report showed that economic growth slowed in the first quarter, but inflation intensified, which raised concerns that price pressure might reappear. Analysts are worried that this concern will be confirmed in Friday's report, and that it may delay or even end hopes of the US Federal Reserve's policy easing this year.
“The fact that it is close to consensus may be a relief,” Shariff said.
After the report was released, futures contract prices related to the Federal Reserve's policy interest rate indicated that the possibility that the Fed would cut interest rates at the mid-September meeting was about 60%, slightly higher than the level before the report was released. Traders continue to see a 50% chance of cutting interest rates a second time before the end of this year.
Federal Reserve policy makers will meet next week. Currently, the market almost generally expects the Fed to keep the policy interest rate in the current range of 5.25% to 5.5%, and continues to say that it is not in a hurry to cut interest rates. Federal Reserve Chairman Jerome Powell said the Federal Reserve needs more confidence that inflation is moving towards their 2% target before cutting interest rates.
Analysts said that although Friday's data did not further damage this confidence, it did not boost it. The report shows that housing and transportation costs continue to drive up prices.
“Given the momentum of the economy and prices, we don't expect the Federal Reserve to strongly consider easing monetary policy as early as the September meeting,” wrote Nationwide economist Ben Ayers (Ben Ayers). “Further economic resilience may delay any interest rate cuts until 2025, which is a key downside risk for next year's growth.”
Interest rate futures are pricing the possibility that interest rates will not be cut at all this year. They are down about 20% from before the report was released, but they are still rising compared to a few weeks ago. At the time, people thought it was most likely that there would be two or even three interest rate cuts this year.