The Federal Reserve's first rate meeting will be on Wednesday. Here's what economists say about rate cuts.


The Federal Reserve has spent nearly two years raising interest rates to control inflation, a task that is steadily paying off. refrigeration price increases. On Wednesday, the central bank will hold its first meeting on 2024 interest rates, raising questions about when the Fed might privatize and start cutting rates.

The Federal Reserve has already indicated that it expects three rate cuts in 2024, thanks to a slower pace of inflation; Some Wall Street economists predict the central bank could issue as many as five cuts over the course of the year.

The rate cuts could provide some relief to consumers and businesses, who have been paying more for mortgages, auto loans, credit card debt and other loans due to the avalanche of rate hikes from the Federal Reserve. But rate-weary Americans will likely have to wait a few more months to see any relief, as Wall Street projects the Federal Reserve will keep rates steady on Wednesday and the first cut will come in March, according to data. financial. supplier data set.

“The Fed is being very cautious as it navigates the possibility of future rate cuts,” Jacob Channel, senior economist at LendingTree, said in an email. “While you don't want to leave rates high forever, you also don't want to cut them prematurely and risk sending inflation soaring again.”

He added: “Because of this, we'll likely see the Fed keep rates steady for a few more months as they wait to get an even clearer picture of how the economy is doing and where it's likely headed.”

When does the Fed meet this week?

The Federal Reserve's Open Market Committee (FOMC) is scheduled to meet on January 30-31, and the group will announce its rate decision at 2 pm ET on January 31.

Chairman Jerome Powell will hold a press conference at 2:30 pm on Wednesday to discuss the FOMC rate decision and provide insight into the central bank's outlook.

When will the Federal Reserve cut interest rates?

Most economists believe the Federal Reserve will keep rates steady on Wednesday, keeping the federal funds rate in a range of 5.25% to 5.5%, according to FactSet.

About 50% of economists surveyed by FactSet said they believe the first cut of 2024 will come at the Federal Reserve's March 19-20 meeting. About nine in 10 economists believe the central bank will issue a rate cut at its April 30-May 1 meeting, FactSet shows.

Among those predicting March will provide the first rate relief is Goldman Sachs, and economist David Mericle wrote in a Jan. 27 research note that he believes a rate cut in March 2024 will be followed by four additional rate cuts. .

The central bank is likely to be cautious in its language on Jan. 31 and avoid “sending a decisive signal,” he noted.

The Fed may want to “douse hopes of any early policy easing,” David Kelly, chief global strategist at JP Morgan Asset Management, said in a research report on Monday. “This is, in part, because they are not really sure how rigid inflation could be in an economy experiencing above-trend economic growth and a still very tight labor market.

What will be the inflation rate in 2024?

The first inflation report of 2024 will be released on February 13, when the Bureau of Labor Statistics will release January price data.

Other recent inflation measures are providing some evidence that inflation continues to cool: December personal consumption expenditures (the Fed's preferred measure of inflation) rose 2.9% annually, excluding food and energy. This is close to the Federal Reserve's goal of reducing inflation to an annual rate of about 2%.

Economists expect inflation to continue cooling in 2024, with Oxford Economics projecting that prices will rise at an annual rate of 2.4% this year and then fall to 2.2% in 2025.

How will the Federal Reserve's 2024 interest rate decisions affect your money?

Since the Federal Reserve is likely to keep rates steady on Wednesday, consumers probably won't notice much of a difference.

Even so, mortgage rates have gone down over the past few months, declining to about 6.7% currently from a 20-year high of more than 8% last fall, according to Freddie Mac data. The Federal Reserve does not directly set mortgage rates, but its policies influence them, Channel of LendingTree noted.

“Although the Federal Reserve has not made any cuts, 30-year fixed mortgage rates are, on average, more than a percentage point lower now than they were at the end of October 2023,” he noted. “This means we could see notable changes in mortgage rates as long as the Federal Reserve keeps its target rate stable.”

Credit card rates could also start to decline a bit, LendingTree credit analyst Matt Schulz said in an email.

“The credit card market is so incredibly competitive that it's probably only a matter of time before some issuers try to reduce rates on new card offers, even just a little, to try to attract new customers,” he said.

How do consumers feel about the economy?

Better, but still not greataccording to a recent survey.

About 27% of Americans told Gallup in a recent poll that they consider the economy to be good or excellent, up from 22% in December. Still, about 45% of people rated the economy as poor, it found.

Inflation is a sticking point for many Americans, the survey group found. About six in 10 adults said recent price increases have created financial hardship for their family, Gallup said.

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