Current:Home > BackWhen will the Fed cut rates? Maybe not in 2024, one Fed official cautions-InfoLens
When will the Fed cut rates? Maybe not in 2024, one Fed official cautions
View Date:2024-12-23 17:26:14
A Federal Reserve official on Thursday raised the possibility the central bank may not cut interest rates at all in 2024, deflating Wall Street's expectations that several reductions could be in store later this year.
"If we continue to see inflation moving sideways, it would make me question whether we needed to do those rate cuts at all," said Federal Reserve Bank of Minneapolis President Neel Kashkari in an interview with Pensions & Investments magazine that was broadcast on LinkedIn.
Kashkari, who said he had previously predicted two rate cuts this year, added, "If we continue to see strong job growth, strong consumer spending and strong GDP growth, then that raises the question in my mind, "Well, why would we cut rates?' Maybe the dynamics we have right now are sustainable."
Kashkari's comments come a day after Fed Chair Jerome Powell said the central bank is likely to lower its benchmark rate later this year, providing relief to consumers and businesses paying sharply higher borrowing costs after 11 rate hikes in two years. But inflation has remained stubbornly above 3% this year, even picking up speed in February, prompting Powell to caution the Fed is wary of cutting rates too quickly.
"What Kashkari did was deliver a cruel potential reality for the market — that inflation remains stubborn — and the Fed, not wanting to repeat the policy errors of the 1970s, may be forced to retreat from suggesting a rate-easing cycle," Quincy Krosby, chief global strategist for LPL Financial, said in an email.
Sticky inflation and stronger-than-expected economic data "keeps the Fed speakers on higher alert, such as Khaskari, who said he penciled in two rate cuts in the dot plot but keeps the option of 'no cuts' if inflation stalls," noted Ben Emons, senior portfolio manager at NewEdge Wealth in a research note.
Emons noted that stocks took a dive after Kashkari's 2 p.m. ET interview as investors digested the possibility of no rate cuts in 2024. The S&P 500 shed 1.2%, while the Dow Jones Industrial Average lost 1.4%.
"The psychology ... is about a realization that a Fed staying more restrictive will weaken the economy in the future," Emons noted.
All eyes on jobs and inflation data
Two major economic reports will likely garner more attention after Kashkari floated the idea of no rate cuts this year. The March jobs report will be released tomorrow at 8:30 a.m., with economists forecasting that businesses hired 200,000 workers last month, a slowdown from February's 275,000.
Inflation data for March will be issued on April 10, a metric sure to be closely watched given that the Fed wants to see the annual inflation rate drift back down to its pre-pandemic level of about 2%. Economists expect prices rose 3.5% on an annual basis in March, which would represent an uptick from the previous month's 3.2% increase, according to FactSet.
Even so, inflation is slowly easing after hitting a 40-year high of 9.1% in June 2022, but still remains higher than the Fed would like.
"We ultimately need to see what happens both with the labor market and inflation," Kashkari added.
For now, the majority of economists polled by FactSet are forecasting a rate cut from the Fed at its June 12 meeting. If that occurs, it would mark the first interest rate reduction since March 2020, when the central bank moved to stimulate growth as the pandemic was slamming the economy.
Asked if additional rate hikes are off the table, Kashkari, who described himself as more hawkish than other Fed officials, responded, "No, they certainly are not off the table."
But that may be a small comfort for inflation-weary consumers battered by high borrowing costs. Added Kashkari, "I don't think they are likely."
- In:
- Interest Rates
- Inflation
- Federal Reserve
Aimee Picchi is the associate managing editor for CBS MoneyWatch, where she covers business and personal finance. She previously worked at Bloomberg News and has written for national news outlets including USA Today and Consumer Reports.
TwitterveryGood! (41)
Related
- Study finds Wisconsin voters approved a record number of school referenda
- The trial date for the New Orleans mayor’s ex-bodyguard has been pushed back to next summer
- Jane’s Addiction cancels its tour after onstage concert fracas
- Caitlin Clark breaks WNBA rookie scoring record, Fever star now at 761 points
- Sister Wives’ Janelle Brown Alleges Ex Kody Made False Claims About Family’s Finances
- Man charged with first-degree murder in shooting of Phoenix police officer
- Musk deletes post about Harris and Biden assassination after widespread criticism
- Why did the Falcons draft Michael Penix Jr.? Looking back at bizarre 2024 NFL draft pick
- Inside Dream Kardashian's Sporty 8th Birthday Party
- Worst teams in MLB history: Chicago White Sox nearing record for most losses
Ranking
- Research reveals China has built prototype nuclear reactor to power aircraft carrier
- Isiah Pacheco injury update: Chiefs RB leaves stadium on crutches after hurting ankle
- How Sister Wives Addressed Garrison Brown’s Death in Season Premiere
- Florida sheriff's deputy airlifted after rollover crash with alleged drunk driver
- Food prices worried most voters, but Trump’s plans likely won’t lower their grocery bills
- Cardi B Reunites With Offset in Behind-the-Scenes Look at Birth of Baby No. 3
- An appeals court won’t revive Brett Favre’s defamation lawsuit against Shannon Sharpe
- A Waffle House customer fatally shot a worker, police say
Recommendation
-
Ex-Duke star Kyle Singler draws concern from basketball world over cryptic Instagram post
-
Microsoft solves 365 outage that left thousands unable to access email, Teams, other apps
-
Polaris Dawn was a mission for the history books: Look back at the biggest moments
-
2024 Emmys: Elizabeth Debicki Details Why She’s “Surprised” by Win for The Crown
-
Don't Miss Cameron Diaz's Return to the Big Screen Alongside Jamie Foxx in Back in Action Trailer
-
Kate Spade's Top 100 Under $100: $259 Bag for Just $49 Today Only, Plus Extra 20% Off Select Styles
-
Get $336 Worth of Tarte Makeup for $55 & More Deals on Top-Sellers Like Tarte Shape Tape & Amazonian Clay
-
The next generation of Buffetts is poised to become one of the biggest forces in philanthropy