The Federal Reserve is due to have its third Federal Open Market Committee (FOMC) meeting of 2024 on April 30 through May 1, and after a bumpy couple of years, Finder’s entire panel says the Fed will hold rates at their current level (5.33%).
There has been a lot of speculation that the Fed will cut rates up to six times in 2024, but none of our panel members sees that first cut coming at the April 30-May 1 meeting.
The panel members unanimously expect the Fed will hold rates at its next meeting, with all saying rates will hold.
Cynthia Wylie, partner and cofounder of the Project Consultant, says that while she doesn’t expect cuts to come in April 2024 but sees them coming at the next couple of meetings.
I think the Fed will hold steady for the next two meetings because debt and inflation are stubbornly high. I think they will start lowering in July and September to give Biden a boost for his reelection. Then, they will hold from there.
Faculty Member at NYU, Howard Yaruss, says that while there is no rush to cut rates, the Fed has been indicating that it will for the better part of a year.
Inflation has stabilized around 3.5%, so there is no urgency to cut rates. On the other hand, the Fed promised a few rate cuts, and 3.5% is a big drop from last year.
Byron Gangnes, UHERO senior research fellow and professor emeritus of economics at the University of Hawaii, says that cuts should come in the second half of the year but could be moved up if the market dictates it in the short term.
Continuing persistent inflation in shelter costs and other non-energy services will cause the Fed to delay its first rate cut until the second half of this year and to adopt a slow pace of cuts thereafter. Better data over the next few months could move the first rate cut up to June.
Associate dean and director of MS in applied economics at Boston College, Aleksandar Tomic, also doesn’t see a cut coming imminently, saying that a cut now could inflame inflation.
Inflation, while relatively stable, is holding steady. So, there is no pressure to fight it, hence no raises in interest rate. Since inflation is not abating AND the labor market keeps strong, there is no pressure to cut rates either, quite the opposite, as rate cut would inflame inflation.
Mike Englund, chief economist at Action Economics, agrees, saying that “the Fed is showing cold feet regarding its desire to commence the easing cycle, given firm inflation and labor market data, but we expect rate cuts to come eventually.”
Oliver Rust, product lead at Truflation, doesn’t see rates getting cut in the short term due to the economy being too hot, adding that “commodities prices rising, particularly oil, will no doubt add more inflationary pressure.”
Finder’s investments editor, Matt Miczulski, cites the minutes from FOMC’s March meeting, suggesting “the Fed funds rate is at its peak and that recent inflation data hasn’t convinced Fed members that inflation was moving sustainably toward its 2% goal rate.”
Former investments writer at Finder.com and current business-to-business correspondent at Bitcoin Magazine, Frank Corva, thinks “the Fed will hold rates where they are until something breaks in the financial system (e.g., more bank failures), which forces them to cut as a means to provide liquidity into the system.”
Aleksandar Tomic
Aleksandar Tomic
Inflation, while relatively stable, is holding steady. So, there is no pressure to fight it, hence no interest rate raises. Since inflation is not abating AND the labor market keeps strong, there is no pressure to cut rates either, quite the opposite, as a rate cut would inflame inflation.
As everything stands, there is no need for action unless we see some unexpected shock in the economy.
Cynthia Wylie
Cynthia Wylie
I think the Fed will hold steady for the next two meetings because debt and inflation are stubbornly high. I think they will start lowering in July and September to give Biden a boost for his reelection. Then, they will hold from there.
I think the Fed will hold steady for the next two meetings because debt and inflation are stubbornly high.
Howard Yaruss
Howard Yaruss
Inflation has stabilized around 3.5%, so there is no urgency to cut rates. On the other hand, the Fed promised a few rate cuts, and 3.5% is a big drop from last year.
Most of the inflation over 2% is caused by lags in data (such as housing) and other items that affect the statistics more than they do consumers. Also, it takes time for rate cuts to have their effect, so it is better to cut sooner rather than later.
Frank Corva
Frank Corva
The Fed will hold rates where they are until something breaks in the financial system (e.g., more bank failures), which forces them to cut as a means to provide liquidity into the system. Or it will begin cutting rates as the election draws nearer as a favor to the Biden administration, which will want voters to feel that their portfolios are doing well as they head to the voting booths in November.
Inflation has proven to be sticky above 3%, and the Fed should be doing everything in its power to bring it down.
Oliver Rust
Oliver Rust
The Economy is still too hot, with strong GDP growth, a continued tight labor market. This coupled with commodities prices rising, particularly oil, will no doubt add more inflationary pressure.
See above
Matt Miczulski
Matt Miczulski
Recent FOMC March meeting minutes suggest the Fed funds rate is at its peak and that recent inflation data hasn't convinced Fed members that inflation was moving 'sustainably' toward its 2% goal rate.
Inflation rates are edging higher over the past three months, while global turmoil could put upward pressure on inflation.
Mike Englund
Mike Englund
The Fed is showing cold feet regarding its desire to commence the easing cycle, given firm inflation and labor market data, but we expect rate cuts to come eventually.
Not provided
Byron Gangnes
Byron Gangnes
Continuing persistent inflation in shelter costs and other non-energy services will cause the Fed to delay its first rate cut until the second half of this year and to adopt a slow pace of cuts thereafter. Better data over the next few months could move the first rate cut up to June.
The risk of inflation getting entrenched in the 3% to 4% range is too high to permit early rate cuts. And with the economy so strong, early cuts are not needed.
Risa Kumazawa
Risa Kumazawa
No provided.
No provided.
Looking further ahead, most of the panel sees the Fed holding rates until either the middle or the end of 2024.
The majority of the panel (67%) believe the Fed decision to hold rates is the correct one. The remaining members are split, with 11% saying the Fed should be cutting rates by 0.25% at the April 2024 meeting and, surprisingly, 22% saying the Fed should raise rates by 0.25%.
If you were hoping for the inflation rate (currently at 3.5%) to return to the Bank’s target range of 2% anytime soon, our panel has some bad news for you, with just 11% saying we’ll see some movement in 2024. 22% say Q1 2025, while the majority (67%) say you’ll have to wait until Q2 2025 or beyond.
From the perspective of individual Americans, our panel has a fairly pessimistic outlook for a range of economic indicators over the next six months. All the panel sees household debt and cost of living increasing, with 67% also seeing house prices on the rise. While the panel is split 50/50 on whether wage growth and employment will rise or fall.
Gangnes says that “labor demand growth should slow gradually as consumer spending growth decelerates. Together with inflation progress to date, this should permit wage growth to slow but not rapidly. ”
As to whether the US will experience a recession in the next 12 months, the majority (57%) say it’s unlikely.
However, a third (33%) say the is a good chance the US will fall into a recession in the next 12 months, with 67% saying it’ll happen before the year is out and 33% seeing it happen in Q2 of 2025 or later.
Corva sees a recession a recession happening in 2024:
“By either Q3 or Q4 2024, we may see the bubble in financial markets burst. Right now, there’s still about $5 trillion in money market mutual funds, but once that flows back into the market, we’ll likely see a melt-up scenario in which asset prices rise in a parabolic fashion before crashing down. The crash in financial markets will trigger the onset of a recession. The recession will be short-lived, though, as the Fed will have to print more money to stave off a deflationary spiral from happening.”
While Miczulski sees a recession possibly looming at sometime in 2025, adding the “economy continues to fend off any near-term recession threats.”
When asked which international variable has the greatest impact on rates at home, the panel sees continued conflict overseas as the biggest threat to the economy at home.
The panel is trending fairly neutral to negative on how they feel about the future of various soft economic indicators.
The April 30-May 1, 2024 FOMC meeting is the third of eight FOMC meetings in 2024.
Photo by Alex Bierwagen on Unsplash
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