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Sunday, November 12, 2023

When will the Fed Cut Rates?

by Calculated Risk on 11/12/2023 01:29:00 PM

If we look at the "dot plot" from the September FOMC projections, the median projection is for the Fed Funds rate to decline to 5.125% in Q4 2024 (from the current 5.25% to 5.5% range). That is one 25bp rate cut in 2024.

Goldman Sachs economists are projecting the first rate cut in Q4 2024:

We continue to expect that rates cuts will start in 2024Q4 and proceed at a pace of 25bp per quarter
BofA economists are still projecting one more rate hike, and then three 25bp cuts in 2024 starting in Q2 2024.

Market participants are pricing in the first rate cut at the June 2024 FOMC meeting, followed by 2 more 25bp cuts in 2024 lowering the Fed Funds rate to 4.50% to 4.75% by December 2024.

It is possible the Fed could raise rates one more time, but my sense is the Fed is done.  Right now, I'd guess the first rate cut will happen in mid-2024, depending on inflation and economic weakness.