- According to the analysis by Jim Bianco, President and Macro Strategist of Bianco Research, it is unlikely that the Fed will cut interest rates before September of this year.
- Bianco emphasized that the probability of a Federal Reserve interest rate cut is trending down until the next four FOMC meetings.
- The Fed is facing a delicate balancing act, especially in the face of a political review following the meetings on September 18, just before the election, and on November 7.
What will the Federal Reserve do in its next move? According to Bianco’s research, there may not be an interest rate cut before September!
When Will the Fed Make the Next Interest Rate Cut?
The U.S. Personal Consumption Expenditures (PCE) report will be released on Friday, March 1. Due to the anticipated delay in expected interest rate cuts by the Federal Reserve, the crypto market suffered a significant blow ahead of the report. According to the analysis by Jim Bianco, President and Macro Strategist of Bianco Research, it is unlikely that the Fed will cut interest rates before September of this year.
Bianco emphasized that the probability of a Federal Reserve interest rate cut is trending down until the next four FOMC meetings. With almost no likelihood of interruptions in the March and May meetings, attention has turned to June and July. However, if the February payroll and CPI data continue to show a strong outlook, markets may retract their expectations for cuts in these months.
The Fed is facing a delicate balancing act, especially in the face of a political review following the meetings on September 18, just before the election, and on November 7. This situation indicates that the probability of an interest rate cut by the Fed before September is low. Additionally, Bianco suggested that announcing the interest rate cut just six weeks before the elections could legitimize it as a political move, contradicting claims that the Fed is not involved in politics.
This week, Wall Street is facing a significant event on the U.S. calendar, the core PCE data report, which is the Federal Reserve’s preferred inflation measure. The release of this report in the near future could potentially have a volatile impact on the market, indicating the need to be prepared for suddenly changing market dynamics.
According to estimates, the core PCE for January is expected to show a 0.4% increase compared to the previous month. This increase could indicate a marginal decrease from 2.9% to 2.7% in the annual figure, implying a modest but positive shift in direction. However, traders are warned that official results could lead to surprises, as they may reflect patterns observed in TUE and PPI surveys conducted a few weeks ago.
FOMC Officials Announced Delay in Interest Rate Cuts
John Williams, President of the New York Federal Reserve, stated that despite stronger-than-expected inflation and labor market performance in January data, the U.S. central bank is preparing to cut interest rates “later this year.” In an interview with Axios, Williams reiterated that his overall perspective did not change based on data for a single month, emphasizing, “My overall view of the economy has not fundamentally changed based on one month’s data.”
In response to questions about inflation concerns, Williams noted that progress toward the Fed’s 2% target may sometimes encounter bumps but confirmed his confidence that the overall economy is moving in the right direction. He said, “Progress toward inflation reaching the Fed’s 2% target can be ‘a bit uneven,’ but overall, I believe both inflation and the economy are moving in the right direction.”
Reiterating the sentiments expressed by other Fed policymakers, Williams indicated a cautious approach to interest rate cuts, suggesting that there should be more confidence in the decline trend in inflation before starting such a measure. He said, “At some point, I think it will be appropriate to withdraw restrictive monetary policy, probably later this year.”
As an influential figure within the FOMC, Williams avoided specifying the timing he prefers for interest rate adjustments or exact triggers for such actions. However, he emphasized the importance of collectively assessing various indicators to determine the appropriate action plan. He said, “It’s really about reading that data and looking for consistent signs that inflation is not just coming down but also moving consistently toward the 2% long-term target.”
Williams stated that significant changes in the economic outlook could lead to reassessment but emphasized that expectations for interest rate hikes are not the main expectation. He highlighted the importance of comprehensive analysis covering labor market dynamics and other indicators in determining the appropriate course of action.
