Traders now expect the Fed to cut interest rates less than twice in 2024.
CitigroupSlotsbonusTwenty-five per cent of economists are betting that almost everyone on Wall Street is wrong about the Federal Reserve.
After three months of slightly higher-than-expected inflation figures, competitors at Bank of America, Goldman Sachs, Morgan Stanley and other banks have cut interest rate expectations for this year. President Germ Powell expressed support for the measures on Tuesday, saying policy makers were in no hurry to loosen policy.
But Andrew Hollenhorst and Veronica Clark of Citigroup say it is wrong to make a hasty judgment because the Fed is still concerned that unexpectedly strong economic growth could stall. As a result, the two central banks maintained expectations of a 5 basis point rate cut this year, saying policymakers were eager to seize any signs of slowing inflation or economic weakness.
"our thinking about the economic trajectory of 2024 is very different from that of other forecasters," Hollenhorst said in an interview. " Hollenhorst has been building sticky inflation expectations in his forecasts for this year. " We believe that the Fed's response function is much milder than consensus. "