Since there are no plans for a Federal Reserve rate cut this summer, most economists on Wall Street think investors can take a break. But some economists still think the central bank might lower its key interest rate at its meeting in July.
“We expect a cut in July,” said Steve Englander, who is in charge of North America Macro Strategy at Standard Chartered Bank.
The Federal Reserve will meet again to talk about interest rates on June 11 and 12. According to what Fed officials have said over the past six weeks, most economists agree that nothing will change at this meeting.
The next Fed meeting is scheduled for July 30 and 31.
It’s only 14% likely that rates will go down in July, but it’s just above 50% likely that rates will go down in September.
English says the following in a note to clients.
Before the July meeting, the government will release two months’ worth of the personal consumption expenditure index, which is the Fed’s favourite way to measure inflation. This means that “there is considerable room for core PCE to slow.”
Also, even though high inflation rates so far this year have caused a lot of worry, inflation is not rising as fast as it did last year in the first four months of the year. That backs up the idea that inflation might be high at the start of the year because of seasonal factors and then lower as the year goes on.
Also, there are signs that the economy is weakening. For example, consumer spending is rising at a 1.1% rate this year, when inflation is taken into account.
In the first quarter, the job market was strong mostly because undocumented immigrants were able to get permission to look for work. He said that job growth has been “tepid” without this boost.
Citi economists also think there will be a cut in July. Fed speakers often say that rates should stay high for longer, but Andrew Hollenhorst, chief economist at Citi, said in a weekly podcast that “ultimately it is the data that drives Fed decision-making.”
According to Hollenhorst, a weaker job market will cause rates to drop in July, and then they will drop at all three of the remaining Fed meetings in 2024.
