When can US Fed rate change be expected as policymakers see just one cut this year - Hindustan Times
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When can US Fed rate change be expected as policymakers see just one cut this year

Jun 12, 2024 11:56 PM IST

As inflation is back on a downward path, this paves the way for interest-rate cuts in coming months.

The US Federal Reserve left its key lending rate unchanged while saying that there could only be just one rate cut this year, down from the three expected in March. In a unanimous vote, the Fed maintained its benchmark interest rate between 5.25 and 5.50 percent and said that "modest" progress had been made toward its long-term inflation target of two percent. This comes despite consumer inflation data pointed to a slowdown in the rate of price increases in May.

US Federal Reserve Chairman Jerome Powell speaks during a press conference.(AFP)
US Federal Reserve Chairman Jerome Powell speaks during a press conference.(AFP)

Read more: US Federal Reserve keeps key lending rate unchanged, one cut possible in 2024

The Fed also updated economic forecasts from the members of its rate-setting Federal Open Market Committee (FOMC) and reduced the median projection for interest rates at end-2024 to the midpoint between 4.50 and 4.75.

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This means that committee only expects one 0.25 percentage point cut before year-end. As inflation is back on a downward path, this paves the way for interest-rate cuts in coming months. 

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What experts said on US Fed rate cut and when it is possible?

Brian Jacobsen, chief economist at Annex Wealth Management, said, “After three months of veering off-track, the disinflation bus is back on the road to 2%.” Short-term interest-rate futures are now pricing in nearly a three-to-one chance of a rate cut by September. 

Carlyle Group Inc.’s Jason Thomas said, “Given how resilient the economy has proven under these seemingly high real interest rates” four cuts would be needed to get the neutral rate — a theoretical interest rate that would maintain a healthy economy without generating too much inflation — down to 4.35%. People thought real rates in excess of 2% was going to suffocate economic activity. Of course that hasn’t happened."

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