Will the Fed Cut Rates in 2024

Will The Fed Cut Rates In 2024
Provided by Rita Wilczek

When does the phrase “no hurry” turn into “not in 2024?”

During a recent testimony to Congress, Federal Reserve Chair Jerome Powell reiterated that he expects short-term interest rates to trend lower in 2024. Still, he’s in “no hurry” to say when he believes that cycle will begin.¹

Powell’s message leads some to conclude that the Fed will change its rate-cut message to “not in 2024” during the next few months. The growing chorus of economists believes that the Fed’s inflation fight will go on longer than expected, which will mean no relief in short-term interest rates any time soon.²

January’s inflation reports were hotter than expected, spotlighting the February inflation updates, starting with the Consumer Price Index on March 12. If the February reports are hot, that may complicate the Fed’s decision and support what economists suggest.³

From my perspective, the Fed is juggling so many balls that it’s impossible to know the tipping point that will prompt the Fed to adjust rates from current levels. In some ways, trying to anticipate the Fed’s next step is a bit of a “fool’s errand.” It could happen in the next month, or it could happen in the next year. We just don’t know.

In the meantime, the federal funds rate is currently at the target range of 5.25% to 5.5%. I'm basing portfolio decisions on today's price levels until the Fed announces something more specific I can hang my hat on.

^{1. CNBC.com, March 6, 2024. “Powell reinforces position that the Fed is not ready to start cutting interest rates.”}

^{2. Fortune.com, March 1, 2024. “The Fed is just not going to cut interest rates this year, top economist Torsten Slok says.”}

^{3. CNBC.com, February 16, 2024. “January wholesale prices rise more than expected, another sign of persistent inflation.”}