Minneapolis, Minnesota – With the possibility of no rate cuts looming for the rest of the year, market participants are closely monitoring the Federal Reserve’s next moves. Neel Kashkari, the President of the Minneapolis Fed, recently mentioned the scenario of no cuts if inflation remains stagnant.
As economists weigh in on the situation, the sentiment towards rate cuts is shifting. George Lagarias, Chief Economist at Mazars, expressed skepticism about the likelihood of rate cuts in the summer, suggesting that they may be postponed until later in the year due to the robust state of the economy.
Market indicators are reflecting this uncertainty, with the probability of rate cuts in June and July dropping below 50% according to CME’s FedWatch tool. Lagarias pointed out that the Fed is cautious following past misjudgments, making them hesitant to act prematurely on rates.
Despite the hesitancy, Lagarias still believes that rate cuts are probable this year, but the Fed is treading carefully to avoid making any missteps. The central bank is waiting for more conclusive data to support any decision on rate adjustments.
Speculation on the possibility of no rate cuts this year continues to grow, with conflicting views among economists. Torsten Slok, Chief Economist at Apollo Global Management, and Vanguard, a top U.S. asset manager, both anticipate no rate cuts due to the strong performance of the U.S. economy.
Former Federal Reserve Vice Chairman Roger Ferguson suggested a 10-15% chance of no cuts this year, adding to the diverse opinions within the economic community. However, some analysts still support the Fed’s initial signaling of three quarter-point cuts in March, based on current economic forecasts.
Goldman Sachs’ Chief Economist, Jan Hatzius, remains optimistic about rate cuts this year, emphasizing the importance of near-term data and the Fed’s reaction to economic indicators. Despite the uncertainty, many economists are closely watching for any changes in the Fed’s stance on monetary policy.