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Sunday, April 21, 2024

When Do Market Participants Expect the Fed to Cut Rates?

by Calculated Risk on 4/21/2024 09:40:00 AM

As of December 2023, looking at the "dot plot", most FOMC participants expected between 2 and 4 rate cuts in 2024:

As of Dec 2023 Meeting
25 bp Rate Cuts FOMC
No Change2
One Rate Cut1
Two Rate Cuts5
Three Rate Cuts6
Four Rate Cuts4
More than Four1

As of the March 2024 meeting, FOMC participants were down to 2 to 3 rate cuts in 2024:

As of Mar 2024 Meeting
25 bp Rate Cuts FOMC
No Change2
One Rate Cut2
Two Rate Cuts5
Three Rate Cuts9
Four Rate Cuts1

Most market participants expect between 1 and 2 rate cuts this year, with the first cut in September.  Here are a couple analyst views:

From BofA:
[W]e revised our Fed forecasts in response to the upside surprise in the March inflation data. We now expect the Fed to start cutting in December rather than June, and we still think cuts will proceed at a quarterly cadence. Importantly, we did not simply push our projected cutting cycle out by two quarters. We removed the June and September 2024 cuts entirely from our forecast, raising the terminal rate by 50bp to 3.5-3.75%.
From Goldman Sachs:
The FOMC was already narrowly divided on its three-cut baseline for 2024, and we think it will now need to see the string of three firmer inflation prints from January to March balanced by a series of softer prints in subsequent months.

We continue to expect cuts at a quarterly pace after July, which now implies two cuts in 2024 in July and November.