First Fed rate cut in June increasingly unlikely – Commerzbank

According to economists at Commerzbank, the release of stronger US employment data, in the form of March Non-Farm Payrolls (NFP), has further reduced the chances of the Federal Reserve (Fed) making a first interest rate cut in June.

Rate cut in the first half of 2024 increasingly unlikely

“The US labor market has once again exceeded expectations.”

“The frankly astonishing strength of the labor market makes a first rate cut by the Fed already in the first half of the year increasingly unlikely.”

“Fed Chairman Powell regularly notes that the imbalance between supply and demand in the labor market is gradually narrowing, decreasing the risk of inflation. However, the new figures do not really support this theory, as that job growth has picked up again since autumn 2023. This indicates that the economy remains very robust. Therefore, there is no need to rush to cut official interest rates: recently, a narrow majority of members of “The Fed was still expecting three rate cuts by the end of the year.”

“March consumer price data will be released next week. Once again, we expect prices to rise a little too much for the Fed's liking.”

“In short, a first rate cut at the June meeting, which we continue to expect, is increasingly less likely. It is possible that the timing of the first cut will be determined mainly by the evolution of inflation.”

Source: Fx Street

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