After the FED left the interest rate unchanged at 5.25-5.50 percent in January, the markets turned to the March interest rate decision this week.
When Will the January FED Interest Rate Decision Be Announced?
While the second FED interest rate decision of 2024 is expected to have an impact on gold, dollar, oil and crypto currencies, the FED will announce its March decision on March 20 at 21:00 CET. FED President Jerome Powell will make a statement after the decision.
In Which Direction Are Expectations Concentrating?
While no reduction is expected in March in line with the statements made by Powell and FED members, according to CME Fed Watch, the probability of interest rates remaining constant is priced at 99%.
Because Powell stated in a recent statement that they did not foresee that it would be appropriate to reduce the policy rate until they had more confidence that inflation would move towards 2% in a sustainable manner.
FT Survey: FED Will Have to Keep Interest Rates High for Longer Than Expected!
While expectations focus on interest rates remaining constant, the Financial Times conducted a survey.
The Fed will have to keep interest rates higher for longer than markets and central bankers expect, according to academic economists surveyed by the FT.
More than two-thirds of the participants in the FT-Chicago Booth survey said that the FED has reached the final stage of its fight against inflation and is trying to complete this stage, and that they think the FED will make two or fewer cuts in 2024.
While participants were divided on the timing of the first interest rate cut between July and September, Harvard University Economist Jason Furman, who participated in the survey, said:
“The FED really wants to reduce interest rates. All its actions and statements are about reducing interest rates. However, the data will make it difficult for them to do this.
“I expect the final phase of the inflation fight to be quite intractable.”
Vincent Reinhart, a former FED official who currently serves as Chief Economist at Dreyfus and Mellon, said that although he did not participate in the survey, the political calendar in the US will affect the time when interest rates will be cut.
“The data says the best time to cut rates is September, but politics says June. But you don't want to start cutting rates this close to the elections.”
*This is not investment advice.