The Federal Reserve on Wednesday gave little indication it’s in a rush to ease monetary policy. Economists on the Street, however, remain hopeful. The Fed kept its overnight interest rate steady in a 3.5%-3.75% range , as expected. The central bank also pointed to a strong economy — hinting that rate cuts later this year may not be a sure thing. “Available indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained low, and the unemployment rate has shown some signs of stabilization,” the Fed’s post-meeting statement said. “Inflation remains somewhat elevated.” At a press conference later, Chair Jerome Powell also noted: “If you look at the incoming data since the last meeting, [there is] clear improvement in the outlook for growth.” He added: “Inflation performed about as expected, and … some of the labor market data came in suggesting evidence of stabilization. So it’s overall, a stronger forecast, really.” Still, Wall Street economists expect multiple rate cuts before year-end: David Mericle of Goldman Sachs: “It will likely take some time for the data to improve enough to create a strong consensus on the FOMC to normalize further because even in our inflation forecast, which is more optimistic than the FOMC’s, the year-over-year rate of core PCE inflation would remain closer to 3% than 2% until mid-year. As a result, we have penciled in the next 25bp rate cut in June, followed by a final cut in September. ” Andrew Hollenhorst of Citigroup: “Most Fed officials had expected further rate cuts this year. The Fed is clearly on hold for now, but the bar to cut is low either on a rise in the unemployment rate or signs that inflation is sustainably slowing. We expect 75bp of rate cuts over the course of the year with 25bp cuts penciled in for March, July, and September. ” Marc Giannoni of Barclays: “Powell argued that policy was well positioned, though he signaled that if/when inflation would moderate, the FOMC could cut again. We retain our expectation of two 25bp cuts this year. ” Fed fund futures traders are also pricing in around two rate cuts before year-end, according to the CME Group’s FedWatch tool.
Wall Street economists are holding onto hope Fed will still cut two or three times this year
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