abrdn: Fed assumes three interest rate cuts in 2024

abrdn: Fed assumes three interest rate cuts in 2024

14 december 2023

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James McCann, Deputy Chief Economist at abrdn, comments on today's Fed meeting:

'FOMC members’ updated forecasts confirm what the market already knew; this interest rate hiking cycle is over. Indeed, the central bank is not only unanimous that rates have peaked, it is now signalling three 25bps rate cuts next year. This is less than the nearly five cuts anticipated by markets, but a more dovish signal than their previous set of forecasts in September for two moves.

Today’s shift will likely embolden investors who have been doubting the Fed’s higher for longer message on rates over recent months as we see signs of inflation slowing and growth cooling. We expect the first rate cut to come in June, especially if we are right that the economy struggles more with elevated interest rates in 2024 than has been the case this year. There is certainly a risk of an earlier move, but this is likely contingent on further clear progress on the inflation front, or an even more abrupt slowdown in activity.'

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