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Niccolo Conte
2024-07-02 08:15:48
www.visualcapitalist.com
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Mid-Year Interest Rate Cut Forecasts for 2024
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Today, many institutions are trimming back their rate cut expectations given strong labor market data and slow progress on inflation.
At the beginning of 2024, several banks forecasted five or more interest rate cuts over the year, while the median projection for Federal Reserve policymakers was three quarter-point cuts by fiscal year-end in March. Now, it has pared this back to one rate cut this year.
This graphic shows mid-year interest rate forecasts, based on institution reports via Nick Timiraos of the Wall Street Journal.
Will the Fed Cut Interest Rates This Year?
Below, we show interest rate forecasts across 21 institutions as of June 2024:
| Forecasted Rate Cuts in 2024 |
Number of Institutions as of June |
Number of Institutions as of April |
Names of Institutions |
|---|---|---|---|
| 0 bps | 3 | 1 | Jefferies, Mizuho, Societe Generale |
| 25 bps | 8 | 0 | Bank of America, Barclays, BNP Paribas, Deutsche Bank, HSBC, JP Morgan, LH Meyer, RBC |
| 50 bps | 7 | 1 | Evercore ISI, Goldman Sachs, Nomura, Oxford Economics, TD Securities, UBS, Wells Fargo |
| 75 bps | 2 | 9 | Citigroup, Morgan Stanley |
| 100 bps | 1 | 5 | MUFG |
| 125 bps | 0 | 3 | N/A |
Overall, more than half of the institutions seen in the above table anticipate the first rate cut to take place in September.
Citigroup, for example, is forecasting quarter-point rate cuts in September, November, and December. In June, the bank scaled back their projections, which were previously calling for four cuts beginning in July. A key indicator that the bank is watching is the unemployment rate, which slowly increased to 4% in May, up from 3.9% a month earlier. It also expects inflation to continue cooling over the coming months.
Like Citigroup, Goldman Sachs and Nomura see the first rate cut taking place in September.
In more of a hawkish camp, JP Morgan anticipates the first cut to be in November due to continued momentum in the labor market. This year, the bank has shifted from three interest rate cuts to one, citing that job weakness may take several months to play out.
Today, many banks are aware that while inflation has moderated, the Fed is keeping a close watch on future inflation risks. As of May, inflation stands at 3.3%, falling for two consecutive months after trending upward in early 2024.
U.S. interest rates have remained at 5.25-5.50% since July 2023, sitting at their highest level in 23 years. Yet, despite higher borrowing costs, it is taking longer than anticipated to beat inflation or dampen consumer spending. Part of the reason is that many people and corporations locked in low interest rates seen during the pandemic, and the impact of higher interest rates hasn’t fully begun to bite.
The post Visualized: Mid-Year Interest Rate Cut Forecasts for 2024 appeared first on Visual Capitalist.
