Wall Street anticipates no surprises from the Fed, focusing on the “dot plot” instead


Wall Street anticipates no surprises from the Fed, focusing on the “dot plot” instead

After more than 20 months of inflation and higher borrowing costs, some analysts predict that the Federal Reserve will not raise interest rates at all this year. Initially, investors, economists, and even Federal Reserve officials had anticipated the central bank to start cutting rates in response to a softening economy. However, the expected Fed pivot to lower rates keeps getting postponed. The market had originally expected six rate cuts to begin in March, but that is no longer on the table.

In a statement at the Fed’s January meeting, Fed Chair Jerome Powell expressed doubt that the committee would be confident enough by March to implement rate cuts. As a result, some economists now believe that the Fed will not cut interest rates throughout the course of the year. Torsten Slok, the chief economist at Apollo Global Management, highlighted that the economy shows no signs of slowing down, and certain inflation indicators are increasing, leading him to conclude that rates will not be cut this year.

Interestingly, the anticipation of interest rate cuts by the Fed seems to have hindered actual rate cuts. US growth expectations for 2024 have risen, and the labor market remains strong with unemployment at historic lows and wage inflation still elevated. With the economy expanding, the potential for increased inflation is a concern as recent data shows that the Fed’s preferred measure of inflation remained higher than the central bank’s target in January. This suggests that the Fed may opt to keep rates unchanged to prevent further inflationary pressure.

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