As we approach the latter half of 2024, the U.S. Federal Reserve remains a key focus for economists and investors worldwide. Despite maintaining its interest rate in the mid-5% range, declining inflation has led to an increase in the real interest rate—the rate above inflation—which effectively tightens monetary policy.
Economists, including Matt Weller from FOREX.com, anticipate that the Fed may implement a rate cut in September to counteract this tightening. This potential move is seen as a strategy to normalize policy by bringing real interest rates back to earlier levels.
Looking Ahead: 2-3 Rate Cuts in 2024
If the September rate cut materializes, experts predict up to three additional cuts by the end of the year, aligning with the final three Federal Open Market Committee (FOMC) meetings. This gradual approach contrasts with previous instances of abrupt policy changes triggered by economic crises.
Earlier forecasts at the beginning of 2024 suggested as many as six rate cuts within the year. While this number appears unlikely now, expectations have shifted toward 2025 for additional cuts. The projected normalization is expected to proceed in a controlled manner, avoiding the volatility of past policy shifts and providing a stable environment for economic growth.
This strategy is poised to impact global markets, tech innovation, and business strategies, making it a crucial development for young global citizens and business enthusiasts tracking the dynamic economic landscape.
Reference(s):
U.S. economy & markets outlook: September rate cuts and tech earnings
cgtn.com
