abrdn: Fed still keeps its foot on the brakes

abrdn: Fed still keeps its foot on the brakes

26 januari 2024

Fed
Inflatie (6) begroting

James McCann, Deputy Chief Economist at abrdn, looks ahead to next week's Fed meeting:

'The Fed will ask the market to be patient when it meets next week. While the central bank is becoming increasingly optimistic that inflation is heading back to target, it is not quite ready to take its foot off the break. Indeed, it will keep policy on hold in January and probably provide another gentle pushback to market expectations for a cut in March. 

This caution reflects a desire to be certain that inflation is moving sustainably lower, especially amid renewed risks to global goods prices due to disruptions in the Red Sea. And activity data are hardly telling the Fed it needs to loosen policy quickly. Indeed, the economy continues to tick along quite nicely for the time being despite high interest rates. 

However, easing is coming, and we currently expect the first rate cut to fall in May. Thereafter we pencil in a brisk easing cycle, reflecting our view that the economy will struggle more in 2024.'

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