FED officials are meeting today to discuss interest rates and determine policy. They are expected to keep interest rates constant at the sixth meeting.
When will FED cut interest rates?
But analysts hope the coming months will provide much needed clarity on what to expect from the central bank.
This clarity will be key for market watchers, who clearly have different views on interest rates.
The predictions of Wall Street's leading banks for the first interest rate cut are different from each other: While JPMorgan and Goldman Sachs expect the first interest rate cut to be made in July, Wells Fargo points to September. Bank of America, on the other hand, does not expect the first discount until December.
Meanwhile, some FED policy makers even expressed the possibility of an interest rate increase instead of a rate cut.
Wall Street's best bet for the first rate cut is September, according to the futures market, and not by much in terms of rate.
According to CME FedWatch Tool, the probability of the FED cutting interest rates in September is approximately 44%, and the probability of the first cut in November is slightly lower.
“Right now it seems like everyone is just throwing a dart and saying when they think they're going to start lowering rates,” Liz Ann Sonders, chief investment strategist at Charles Schwab, said in an interview on CNN last week.
Economic forecasts sometimes miss the mark, according to minutes from the Fed meeting in March. Fed economists frequently state that their forecasts contain a “high degree of uncertainty.”
This uncertainty seems to have gotten worse lately. Progress stalled in the first quarter of the year after inflation rates fell throughout 2023, forcing giddy investors who had once priced in several rate cuts from the spring to recalibrate their forecasts.
This reflects the famously bumpy nature of inflation's journey back to the central bank's 2% target, as Fed Chairman Jerome Powell has frequently noted.
*This is not investment advice.
