Fed Towards Rate Cut
London, 31 July 2024
For the eighth consecutive meeting in July 2024, the Federal Reserve is expected to keep the federal funds rate at a 23-year high of 5.25%–5.50%.
However, in light of weakening labour market activity and indications of declining inflation, authorities are likely to provide a critical hint that they may cut borrowing costs in the upcoming months. June saw a three-year low for the core rate and a decline in annual headline inflation to 3%, the lowest since June 2023.
Additionally, the yearly PCE rate dropped from 2.6% to 2.5%. The central bank's favoured inflation indicator, the core PCE rate, stayed significantly below its high in 2022, at 2.6%. In addition, payroll growth is decreasing, layoffs are increasing, and the unemployment rate is at a record-high of 4.1% from 2021.
Forecast
The US benchmark interest rate was 5.50 percent as of the most recent record. The global macro models and analysts at Trading Economics predict that by the end of this quarter, the interest rate in the United States will be 5.50 percent. Our econometric models predict that, over the long run, the US Federal Funds Interest Rate will tend towards 4.25 percent in 2025 and 3.25 percent in 2026. (Source: Trading Economics)
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