The weekend brought about rapid investor conversations regarding interest rate cuts by the Federal Reserve despite the Federal Chair Jerome Powell dubbing the hopeful economic sentiment as “premature”. However, stock markets took great comfort from the slowing rates, with Bitcoin hitting a 19-month high and Nvidia registering the top 2% of performance stocks.
Federal Reserve predicted to cut rates throughout 2024 and 2025
The growing confidence in the forex market was edged on by bond traders on Sunday as the Fed hit the peak of its rate-hiking cycle. After extending their rally Friday, treasuries steadied in Asian trading on Monday after Powell noted that policy was far into restrictive territory. The global company ING Economics also forecasted a string of rate reductions throughout 2024, possibly even leading into Q1 2025, with cooling inflation and modest growth helping to steady the economy.
James Knightley Source: LinkedIn
James Knightley, Chief international economist at ING, stated:
We have modest growth and cooling inflation and a cooling labour market — exactly what the Fed wants to see.
Not only this, but Knightley also believes that the six predicted rate reductions next year will be at 25 basis points each, totalling 150 basis points, with an extra four rate cuts in Q1 of 2025, totalling 135 basis points.
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Despite this promising outlook, household income still remains low as household expenditure continues to push upwards as we enter the winter months. It seems Powell will have to grapple with rate cuts in the face of household stagnancies.
