Today’s question is: Will the Fed cut interest rates for 2024?
As you most likely know, over the last couple of years, we’ve had very high inflation coming out of the pandemic. The way that you combat inflation is to raise interest rates. Ultimately, raising interest rates will have the effect of making large purchases or capital expenditures that are commonly financed more expensive. So, that has the effect of stalling the economy and getting inflation in check.
In the last year or so, the Fed has increased interest rates 11 times. The current expectation is that a shift towards reducing interest rates will likely occur soon.
After the December 2023 Fed meeting, they expressed their reluctance to cut interest rates because while inflation has come down, it’s still not at the level that they would like to see it.
Many people were expecting cuts this coming May, but with new data coming out showing that inflation is still a little bit elevated, things are a little bit unknown right now. Many individuals anticipate further developments around June.
The most recent Fed minutes that came out certainly expressed a reluctance to cut interest rates anytime soon. You don’t want to be cutting interest rates too soon and too steeply. The bottom line is inflation has tempered but it is still slightly elevated. So, we’re in a “wait and see” sort of pattern.
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