2 May 2024
If you are covering the Federal Reserve’s decision to hold interest rates, please find below a comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
“The Federal Reserve has found that it has become a victim of its own success. Having supposedly achieved the notion of a soft landing for the economy, interest rates are looking like they will remain at elevated levels for considerably longer than much of the market had hoped. Today’s decision to keep them on hold and continue to wait for the data to change has become a familiar one over recent years and will result in the higher for longer narrative becoming more entrenched.
“Ultimately, the Fed is facing an economy that continues to prove remarkably robust in the face of high inflation, rising rates and slowing global growth. The labour market remains tight, and despite the persistence of inflationary trends, this is helping to drive economic growth. The consumer continues to defy external pressures.
“There have been some signs that the data is beginning to soften and the economic winds changing. This will likely mean rate cuts in the near term can remain on the table, however, there is no major red flag or alert that would cause the Fed to act swiftly. Furthermore, with the looming presidential election in November, there is a possibility that any rate cuts this year are put in jeopardy.
“The soft landing has been achieved for now, but this has only increased the clamour from markets for rate cuts. Like much of the past three years, where the Fed goes from here will be incredibly challenging.”
