Achi news desk-
Traders now expect a 41 basis point drop in 2024, down significantly from the 160 basis points of easing they predicted earlier this year.
Photo credit: TV9
Federal Reserve officials, led by Chairman Jerome Powell, on Tuesday backed away from providing any guidance on when interest rates might be lowered. His words dashed investors’ hopes for a significant reduction in borrowing costs this year.
“The latest data clearly has not given us more confidence and instead suggests that it is likely to take longer than expected to gain that confidence,” Powell said at a forum in Washington, in what is expected to be his last public appearance before April 30. Policy meeting on May 1
The dollar was largely unchanged, with the euro trading at $1.062 during Asian trading hours on Tuesday, close to a five-and-a-half-month low of $1.06013. Against a range of currencies, the dollar was at 106.33, slightly below a five-month high of 106.51 set on Tuesday.
“Right now, given the strength of the labor market and the progress in inflation so far, it’s appropriate to allow restrictive policies more time to work and let the data and the evolving outlook guide us,” Powell said at the forum in Washington.
Powell’s words effectively extinguished any remaining hopes for the Fed to cut interest rates in the near term, as markets now view September as the start of the easing cycle, pushing it back from June.
Traders now expect a 41 basis point drop in 2024, down significantly from the 160 basis points of easing they predicted earlier this year.
“Powell and other senior Fed officials are sticking to the view that rate cuts have been delayed and not abandoned, which continues to provide comfort to investors,” said Ben Bennett, APAC investment strategist at Legal And General Investment Management.
Now the first cut is expected in September and the chances of a second cut are diminishing.
Posted: April 18, 2024, 8:01 PM IST
Download the Money9 app for the latest updates on personal finance.
