2024-03-20 08:12:00
Fed monetary meeting: the timetable for rate cuts in focus
The American Federal Reserve (Fed) ends a two-day monetary policy meeting on Wednesday March 20, scrutinized by the markets for clues on the timetable for monetary easing expected this year.
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The first rate cut from the Fed is expected in June by most market players. Photo: AFP/VNA/CVN
Started “at 9:00 a.m. local time (1:00 p.m. GMT) as planned” Tuesday March 19, according to a spokesperson, the meeting of the Monetary Committee (FOMC) of the most powerful central bank in the world, ends Wednesday March 20 at mid- daytime.
The markets hardly expect any movement on rates for the moment as inflation has moderated its slowdown but they will watch for any indication on the future of monetary policy.
The Fed will issue a press release at 2:00 p.m. (6:00 p.m. GMT), and the president of the institution, Jerome Powell, will hold a press conference thirty minutes later. The central bank will also release its forecasts for inflation, growth and unemployment rates for 2024.
For Ryan Sweet, chief economist for Oxford Economics, “the Monetary Committee will avoid committing to a timetable for the first rate cut, given that inflation has recently surprised on the rise.”
He said the central bank “will emphasize that it needs additional evidence that inflation is on a sustainable path towards its 2% target before cutting rates.”
New projections
“The emphasis will really be placed on the new economic projections,” said Lydia Boussour, economist for EY Parthenon, in an interview.
Investors will therefore look at the famous Fed “dot plot” graph which brings together the estimates of the evolution of interest rates by the members of the Monetary Committee (FOMC). This helps predict how many times the Fed intends to cut rates in 2024 and next year.
So far, the Committee’s latest projections from December predicted three rate cuts by the end of the year.
But, given the recent resistance of inflation, which rose to 3.2% year-on-year in February for the consumer price index (CPI), the market does not exclude that the Fed will no longer consider only two declines this year.
For Lydia Boussour, economist for EY Parthenon, there is really a risk of seeing only two rate cuts. The first drop is expected in June by most market players, according to the CME Group assessment.
“And if it’s not June, it will be July,” said Kathy Bostjancic, chief economist for the Nationwide insurance company.
Overnight rates set by the Federal Reserve – which represent the cost of money that banks lend to each other – are currently between 5.25% and 5.50%, the highest they have been in more than twenty years. .
Before launching monetary easing, Fed officials want to be sure that prices do not start to soar again. During the last meeting, Fed President Jerome Powell took the markets by surprise by ruling out the hypothesis of a first decline in March.
At the beginning of March, before elected representatives of Congress, he warned: “the economic outlook is uncertain and continued progress towards our 2% inflation objective is not assured.” But he nevertheless added that “if the economy develops as expected, it will probably be appropriate to start easing monetary policy at some point this year.”
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