Allison Boxer
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Macroeconomic uncertainties prompted the Federal Reserve to signal a slower pace of policy rate cuts in 2025 and beyond.
Recent economic data support the Federal Reserve’s meeting-by-meeting approach to rate cuts.
Starting With a Bang: Fed Cuts Policy Rate
We believe the Fed is on a path to continue to cut rates over the next several meetings to realign monetary policy with a now more “normal” U.S. economy.
The central bank’s latest policy statement and Chair Jerome Powell’s remarks suggest that an initial interest rate cut could come as soon as September.
A second straight month of encouraging U.S. core CPI data supports an initial Federal Reserve rate cut as early as September.
Good news on U.S. inflation in May did not sway the Federal Reserve to signal interest rate cuts could come sooner.
Regardless of the U.S. presidential election’s outcome, the budget deficit will likely remain high, but market confidence in U.S. Treasuries is expected to remain stable.
A timely discussion on the term premium, which may be signaling the possibility of rising compensation for bond investors as the yield curve potentially re-steepens.
April’s U.S. inflation report likely offers some comfort to Federal Reserve officials, but rate cuts are unlikely until we see a more substantial deceleration in inflation.