Fed Interest Rate Cut Is Positively Forecasted To Take Place By The End Of 2024

Key Points:

• Minneapolis Federal Reserve President Neel Kashkari indicated a potential Fed interest rate cut in December.
• The Federal Reserve lowered its projection for rate cuts this year to one, down from three.

In an interview with CBS’s “Face the Nation,” Minneapolis Federal Reserve President Neel Kashkari suggested a possible Fed interest rate cut by the end of the year, specifically in December.

Fed Interest Rate Cut Could Take Place in December

The forecast aligns with Bank of America‘s prediction, which Kashkari described as reasonable. The Federal Reserve concluded last week with a revised outlook, lowering their projections for rate cuts this year to one, down from the three estimated in March. The cautious stance stems from the need for more evidence that inflation is steadily moving toward the 2% target, especially after the progress stalled earlier this year.

Kashkari emphasized the Fed’s current strategy of gathering more comprehensive data on inflation, the economy, and the labor market before making any policy decisions.

“We’re in a very good position right now to take our time, get more inflation data, get more data on the economy, on the labor market, before we have to make any decisions,” Kashkari stated. He added that if there were to be one rate cut, it would likely occur toward the end of the year.

Surprising Strength in US Labor Market Amid Rate Hikes

Kashkari, known for his cautious approach to monetary policy, expressed surprise at the robust performance of the US labor market despite significant Fed interest rate hikes in 2022 and 2023. Nevertheless, he anticipates a cooling of the labor market in the near future.

Last week, the Federal Reserve decided to maintain the policy interest rate in the range of 5.25%-5.50% to sustain pressure on the economy and curb inflation. The Fed’s dot-plot chart also suggests only one rate reduction this year.