U.S Fed likely to cut rates later rather than sooner; say experts

Amidst escalating concerns over inflationary pressures, the United States Federal Reserve's timeline for interest rate cuts has shifted, possibly postponed. The latest inflation data, showcasing a persistent surge in price growth surpassing the Fed's 2% target, has spurred a reevaluation of earlier expectations.

The inflation data indicates that consumer prices have been rising at a faster-than-expected pace, This trend suggests that the cost of goods and services is increasing at a rate that may outpace wage growth, leading to decreased purchasing power for consumers.

In light of these developments, experts are revising their projections for the timing of potential rate cuts by the Federal Reserve. Previously, there was speculation among analysts that rate cuts could occur as early as June. However, the latest assessments suggest a significant shift in expectations, with forecasts now pointing towards a delay in rate adjustments until the latter part of 2024.

The International Monetary Fund's Managing Director, Kristalina Georgieva, has weighed in, projecting that the Federal Reserve might opt for a reduction in interest rates by the end of 2024. Georgieva's prudent counsel emphasizes the importance of patience, urging the Fed to base its decisions on concrete data trends rather than rushing into premature actions, reported CNBC

Deutsche Bank AG and Bank of America Corp. economists have revised their forecasts, aligning with the apprehensions regarding inflation. Both institutions now anticipate the Federal Reserve to ease policy only once this year, in December, a notable departure from earlier predictions of rate cuts commencing as early as June, reported Bloomberg.

The prospect of delayed rate cuts has triggered a pullback in the U.S. stock market, with the benchmark S&P 500 experiencing a nearly 2% decline since the beginning of April. Analysts suggest that Fed funds futures pricing data indicates a possible rate cut by September, according to the CME FedWatch Tool.