What to look out for:
Anticipate a deliberate and cautious strategy from the Federal Reserve regarding interest rate cuts in 2024. While the Fed’s approach to its balance sheet plans may draw increased scrutiny.
Today, the Federal Open Market Committee wraps up its two-day April policy meeting, with a policy decision scheduled for release at 2 p.m. Eastern. Fed Chairman Jerome Powell will address the public in a press conference beginning at 2:30 p.m.
Futures markets are showing strong confidence that there will be no alterations to interest rates during this meeting.
Bitcoin experienced a 5.3% decline, settling at $57,350 on Wednesday, amid investor anticipation of the Federal Reserve’s forthcoming interest rate verdict. Scheduled to convene on Tuesday, the Fed Open Market Committee is widely expected to maintain the target rate between 5.25% and 5.50% during its Wednesday session.
The cryptocurrency market underwent a significant downturn, primarily attributed to the lacklustre response from traders to the Bitcoin and Ether ETFs in Hong Kong. Trading volume barely surpassed $10 million, failing to stimulate market excitement.
Coming off the back of such a disappointing show of the Hong Kong ETF yesterday, the news about the Fed’s proposed interest rate cut might not have come at a worse time.
Despite the Federal Reserve’s upcoming interest rate announcement today, Wednesday 1st May 2024, consumers are unlikely to experience immediate relief from high borrowing costs. Initial projections by approximately 90% of economists at the start of the year suggested a reduction in the Fed’s benchmark rate during the May 1 meeting. However, fluctuating economic conditions and sustained inflationary pressures have thwarted policymakers’ plans. Consequently, analysts surveyed by financial data company FactSet now anticipate that the Fed will maintain rates unchanged.
Forecasts from FactSet indicate that a majority of experts anticipate the Fed to defer interest rate reductions until later in 2024, potentially around September or November. Consequently, consumers may face heightened loan payments, including credit card bills and mortgages, despite ongoing inflationary trends.
“The Fed has said time and time again that inflation would be difficult to tame, and they are more than willing to keep rates high until inflation becomes more manageable,” Jacob Channel, senior economist at LendingTree, told CBS MoneyWatch. “I understand why people are concerned, and perhaps a little upset, that the Fed isn’t champing at the bit to cut rates.”
Jacob Channel, senior economist at LendingTree, emphasized the Fed’s stance on taming inflation, asserting that the central bank is willing to maintain high rates until inflation stabilizes. Channel cautioned against premature rate cuts, warning of exacerbating inflationary pressures.
He clarified, though, that things might get worse for a lot of people and companies if the Fed lowered rates too soon and inflation increased even further.
WHAT TIME IS THIS WEEK’S FED MEETING?
The Federal Reserve’s Open Market Committee will reveal its interest rate decision on Wednesday at 2 p.m. Eastern time, followed by a press conference at 2:30 p.m. led by Federal Reserve Chair Jerome Powell.
Although there were earlier expectations for three rate cuts this year, Wall Street investors currently anticipate only one in 2024, attributed primarily to persistent inflationary trends exacerbated by rising housing and fuel costs.
Approximately half of economists project a rate cut at the Fed’s September 18 meeting, with the majority expecting one at the November 7 meeting. Analysts predict modest rate reductions of one-quarter of a percentage point each.
“It’s not surprising that investor expectations for future rate cuts have drastically decreased,” said Stephen J. Rich, CEO of Mutual of America Capital Management, in an email. “At this point, we see the potential of two cuts amounting to a half of a percentage point this year.
HOW WILL THE FED’S DECISION IMPACT YOUR MONEY?
Investors should prepare for sustained high borrowing costs, cautioned Channel, predicting mortgage rates above 7% and continued record-high credit card rates.
However, savers may find solace in higher-interest savings accounts and other savings instruments offering returns above 5%, noted Ken Tumin, a banking analyst at DepositAccounts.com.
One more thing before you go
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