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Home»Business»Finance»Predicting Interest Rate Trends in 2024
Finance

Predicting Interest Rate Trends in 2024

News RoomBy News RoomMay 16, 20240 ViewsNo Comments3 Mins Read
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The Federal Open Market Committee (FOMC) has surprised markets by not cutting interest rates in 2024 as previously predicted. Instead, it is now anticipated that one or two interest rate cuts may come later in the year. The delay in lowering interest rates is due to the slower progress in reducing inflation than initially expected. The job market has remained strong, which has alleviated concerns that could have prompted rate cuts.

Currently, short-term U.S. interest rates stand at 5.25% to 5.5%, which was set when the FOMC last raised interest rates in July 2023. Fixed income markets had earlier forecasted rate cuts to begin sooner in 2024. The robust job market has given policymakers the opportunity to monitor inflation data trends before making any decisions. While there was disinflation towards the end of 2023, the inflation figures for Q1 2024 have not shown significant progress. However, the most recent Consumer Price Index report for April showed some improvement.

Expectations for interest rate cuts in 2024 have been scaled back following the tone of the FOMC statements. Federal Reserve Chair Jerome Powell, speaking at the annual general meeting of the Foreign Bankers’ Association in April, highlighted the strength of the labor market and the lack of progress on inflation in the first quarter of the year. Powell emphasized the need to be patient and allow restrictive policy to take effect. While most policymakers initially projected two to three interest rate cuts in 2024, it is likely that fewer cuts will be projected at the next FOMC update scheduled after the June 12 meeting.

Kangen Water

Assuming interest rates remain steady after the June meeting, there will be four more opportunities for the FOMC to potentially adjust rates in 2024. The current prediction is for rate cuts in September and December, with a 10% chance that rates will remain unchanged for the year. Thirty-year mortgage rates increased to over 7% in April 2024 as the Fed kept rates higher for longer. Mortgage rates have been on an upward trend since early 2022, and the FOMC’s actions play a crucial role in determining long-term interest rates.

Despite the delays in interest rate cuts compared to expectations, markets still anticipate one or two rate cuts in 2024. This suggests that interest rates may remain elevated even towards the end of the year. The uncertainty surrounding how the FOMC will choose to adjust interest rates in the remaining meetings of 2024 will continue to impact various financial markets, including mortgage rates. Investors and economists will closely monitor FOMC statements and economic data to assess the potential future actions of the committee and their implications for the economy.

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