Rate Cut Delayed: Latest Survey Shifts Expectations to June
Economists now expect the Federal Reserve to cut interest rates as early as June, according to the latest monthly survey. Last month, the initial estimate was still March, but the schedule was pushed back because inflation was deemed "stubborn" and the labor market appeared more stable.
The main reason: the Fed's favorite inflation indicator is expected to remain above its 2% target at least until the middle of next year. Under these conditions, the window for a quick rate cut is narrower, especially if the economy remains strong.
After cutting rates three times in a row by the end of 2025, the Fed is expected to hold rates at its meeting next week. The survey also projected a second cut—and the final one this year—to occur in September.
Investors have also shifted their expectations. Federal funds futures indicate the first cut is now considered unlikely before June, whereas a month ago the market still saw a greater chance of an April cut.
The Fed is also considered under no pressure to quickly ease policy because economic growth remains solid. Fourth-quarter GDP is projected to rise 2.1%, and concerns about a government shutdown are not expected to depress the economy as much as previously thought. However, the Fed's independence has also come under scrutiny, with some economists warning that trust is a key asset for central banks—if that trust erodes, transaction costs across the economy could rise. (alg)
Source: Newsmaker.id
