Destroying hopes of cutting interest rates in March or May, a series of experts said: 'We have to wa

Don't wait for an interest rate cut at one of the next two meetings in March and May," many experts said.
The top question that investors and consumers need to answer today is when the US Federal Reserve (Fed) will start cutting interest rates for the first time in two years. However, when Tuesday's report showed hotter-than-expected inflation, economists partly predicted that
cuts may have to wait longer.”

Even before Tuesday's inflation data, the Federal Reserve had signaled it would take a cautious approach. Fed Chairman Jerome Powell told CBS News' "60 Minutes" earlier this month that the central bank wants more confidence that inflation is falling before it begins cutting interest rates. The Federal Reserve began raising interest rates in March 2022. Since then, 11 rate hikes have helped reduce annual inflation from a high of 9.1% in June 2022 to 3.1%. in January 2024. However, it is still higher than what economists had predicted as well as the Fed's 2% inflation target.

“The Fed is being very cautious when making decisions regarding interest rate cuts,” Jacob Channel, economist at LendingTree, noted in an email. The reason for this is because they don't want to start cuts prematurely and end up making inflation worse.” Hot inflation data in January showed the Fed's difficulty in timing its first rate cut, he added. “For this reason, if you believe cuts are imminent, you could be setting yourself up for disappointment.”

When will the first cuts take place?

Economists revised their forecasts after Tuesday's inflation report, many of them now predicting the Fed's first cuts will come later in 2024 than previously forecast. . In other words, don't expect a rate cut at either of the next two meetings in March and May.

Earlier this year, most economists predicted the first rate cut in 2024 would come at the March 20 meeting. But as of Wednesday, only one in 10 continued to forecast another. cut interest rates that month.

Likewise, fewer and fewer economists predict that the Fed will cut interest rates at its May 1 meeting. Currently, only about a third are still holding out on this view, down from 90 % earlier this year.

Instead, people will most likely have to wait until the Fed's June 12 meeting for the first rate cut, according to economists polled by FactSet.

“In our view, forecasts for rate cuts have been and remain overly aggressive,” PNC noted.

With economists pushing back their rate cut forecasts to mid-2024, the initial impact was on the stock market, with the Dow Jones falling 525 points, or 1.4%, on Friday. 3.

Additionally, “when the growth rate of inflation is worse than expected, mortgage rates typically increase. And we could see slightly higher mortgage rates in the coming weeks,” said economist Channel.

Officials have the right to vote on interest rates this year: Give the expected number of interest rate cuts, emphasizing that the FED's plan will not 'deviate' despite the hot data