The FED left interest rates unchanged at 5.25-5.50 percent in March. After the March decision, the markets turned to the May interest rate decision this week.
When Will the May FED Interest Rate Decision Be Announced?
While the third FED interest rate decision of 2024 is expected to have an impact on gold, dollar, oil, Bitcoin (BTC) and crypto currencies, the FED will announce its May decision on May 1 at 21:00 CET. FED President Jerome Powell will make a statement after the decision.
In Which Direction Are Expectations Concentrating?
Macroeconomic data that signals that the fight against inflation may last longer than expected and the hawkish statements of FED officials increase concerns that the FED may start interest rate cuts later.
At this point, while the probability of the FED not changing interest rates on May 1 is priced at 97.1%, expectations for an interest rate cut in the USA this year have now dropped to one or two.
According to AA news, analysts reminded that it is certain that the FED will keep the interest rates constant at the meeting to be held on weekdays, and stated that they expect the earliest interest rate cut in September.
Accordingly, Rabobank Senior US Strategist Philip Marey stated that the US inflation data for March destroyed the hope of the FED to start reducing interest rates in June and said:
“We now expect the first interest rate cut in September and the second rate cut in December.
We think Donald Trump can win in the presidential elections. Afterwards, we predict that there may be an increase in inflation due to a possible global import tariff and that the FED may pause the interest rate reduction cycle after making two more interest rate cuts in 2025. “
FWD Bonds Chief Economist Chris Rupkey also stated that monthly changes in core inflation may cool down slightly in the second and third quarters of 2024. “FED President Jerome Powell needs more than one data showing that inflation has cooled in order to cut interest rates. That's why we think we will see the first interest rate cut in September. ” said.
Finally, Berenberg Senior Economist Dr Felix Schmidt also stated that although the Fed will increase interest rates by more than 500 basis points cumulatively in 2022 and 2023, the US economy continues to remain surprisingly resilient.
At this point, Schmidt argued that the economic situation, the tight labor market and the stalled process in the fight against inflation would cause the FED to leave interest rates at the current level until the end of 2024.
“We think that when the fiscal stimulus ends, probably in 2025, the FED will gradually move towards easing monetary policy.
“The FED may make four interest rate cuts of 25 basis points each by the fall of 2025.”
While the FED was expected to keep interest rates constant in May, Bitcoin started the critical week with a decline. BTC, which fell from $ 63,000 to $ 62,000, continues to be traded at $ 62,420 at the time of writing.
*This is not investment advice.