01 February 2024
If you are covering the news that the Federal Reserve has left interest rates unchanged, please see the following comment from Lindsay James, investment strategist at Quilter Investors:
“The Federal Reserve has kick started 2024 with a further hold on interest rates, the fourth consecutive meeting at which it has left rates unchanged, but with a further hint that rates are likely to be eased in the coming months.
“The question now is not whether the Fed will look to cut rates, but rather what will the timing and pace of its rate cuts look like? Macro-economic data has been strong, and the Fed’s preferred measure of inflation, core PCE, has been trending much closer to target. In fact, on the basis of annualization of the last three months of readings, it is already back below the 2% level. Job openings have continued to look robust, coming in well ahead of estimates, demonstrating the labour market remains an important driver of economic growth and serving to underline that the second of the Fed’s goals, namely ‘maximum employment’, is also looking like it’s been achieved.
“Though strong macro-economic data alone is not a reason for the Fed to delay rate cuts, only should it serve to trigger a further inflationary pulse, the market has seen the likelihood of a first rate cut in March slashed, and today’s meeting will almost certainly trigger further calibration around the extent and timing of future cuts. The Fed has reiterated its ‘data dependent’ decision making, but so long as inflation continues its downwards trajectory it is unlikely it will hold out on cuts for too much longer.
“With both the Federal Reserve and the European Central Bank opting to hold rates, the Bank of England is expected to follow suit at its MPC meeting tomorrow. The central banks will be reluctant to move too much too quickly for fear of disrupting the progress they have made in getting inflation under control, but it is only a matter of time before one of them begins the shift in policy.”
