Reserve

Future

Amid the swirling economic forecasts and market speculations, a consistent narrative emerges: the Federal Reserve, <a href="https://www.cryptopolitan.com/chinas-economy-is-still-bigger-than-the-uss/" data-type="post" data-id="416975" rel="noopener noreferrer nofollow">America’s</a> central banking authority, is playing the long game with its interest rate strategies.<a href="https://archive.ph/e6GoF#selection-2215.0-2218.0" rel="noopener noreferrer nofollow" target="_blank"> </a>
A recent poll of top academic economists, conducted by the Financial Times, reveals a consensus that the Fed’s current rate-raising phase has likely reached its zenith.
However, the anticipation for rate cuts remains guarded, with predictions pointing towards the third quarter of 2024 or later as the probable starting point.
<h3 class="wp-block-heading" id="understanding-the-fed-s-cautious-approach">Understanding the Fed’s Cautious Approach</h3>
This projection contrasts sharply with the optimism of Wall Street traders, who have been placing their bets on an earlier onset of rate cuts, potentially as soon as March 2023.
Their expectation leans towards a reduction in the federal funds rate to about 4 percent by the end of the year, over a full percentage point below its current peak.
But, the economists surveyed suggest a more tempered approach from the Fed, expecting a mere half-percentage point cut at most in the next year.
The survey, a collaborative effort between the Financial Times and the Kent A Clark Center for Global Markets at the University of Chicago Booth School of Business, involved 40 economists and shed light on the diverse opinions surrounding the Fed’s inflation management strategies.
As the world’s largest economy shows signs of deceleration, the timing and magnitude of interest rate adjustments are under intense scrutiny.
<h3 class="wp-block-heading" id="economic-indicators-and-future-projections">Economic Indicators and Future Projections</h3>
One of the critical factors influencing the Fed’s decisions is the labor market’s health. Despite a slowing pace of job additions, the market remains robust, challenging the Fed to balance its objectives of controlling inflation without triggering economic contraction.
Recent job data underscores the complexity of this task, with an average of 190,000 new jobs added monthly over the past five months, slightly above the decade’s average since 2010.
External factors, like the Opec+ cartel’s decision to slash crude output and escalating conflicts impacting oil prices, add layers of unpredictability. These developments could prolong inflationary pressures, making the Fed’s path towards easing rates more arduous.
Amid these variables, the surveyed economists largely concur that the Fed’s preferred inflation gauge, the personal consumption expenditures price index, will likely exceed the 2 percent target by the end of 2024, with a median estimate of 2.7 percent.
This aligns with the narrative of a persistent but gradually easing inflation scenario. The surveyed economists also weighed in on the likelihood of a recession and the Fed’s quantitative tightening program.
While a recession seems a distant possibility, with a majority ruling it out until at least the third quarter of 2025, the central bank’s balance sheet reduction plans are expected to continue unabated until the latter half of 2024.
In terms of unemployment, the economists’ opinions were divided, though a slight majority anticipates a rise to 5 percent or more in the next three years. This forecast, while not alarming, indicates a cautious outlook for the labor market.
The Fed, renowned for its meticulous and often conservative approach, seems set on maintaining its high-interest rate regime well into 2024.
This stance, underpinned by a complex interplay of economic indicators and external factors, reflects the central bank’s commitment to steering the economy towards a stable and sustainable path.
As always, the Fed’s actions will be closely watched, with each decision having far-reaching implications for markets and economies worldwide.

Federal Reserve will keep rates high until at least Q2 2024

Table of Contents

Cryptopolitan_News

Other articles published on Dec 7, 2023

Dogecoin Reaches $0.10, Is DOGE set to Begin It's Rally?

SEC’s discussion with Bitcoin ETF issuers has moved into a key stage

Top Cryptos Under $1 With 10X Potential: XRP, TRX, NUGX

Binance Will Lose Dominance After Plea Deal: Head of Digital Assets Research at VanEck

Soulcial Unveils V2 with Social Behavior Traits Index (SBTI) and Pump Game, Revolutionizing NFT T...

Vivek Ramaswamy slams Gary Gensler, SEC over ineffective crypto rules

Join our free newsletter for daily crypto updates!