Investors were optimistic late last year about the Federal Reserve’s plans for interest rate cuts in 2024. However, new inflation data and cautious comments from Fed officials have tempered those expectations. Markets are now pricing in three interest rate cuts for 2024, down from the previous consensus of six cuts.
Goldman Sachs has revised its forecast, now expecting four interest rate cuts in 2024, with the first cut projected to come in June. This change comes as Fed officials and recent meeting minutes indicate a more cautious approach to lowering rates. Economists believe the Fed is confident in the economy’s stability and will wait for more data before implementing rate cuts later in the year.
Despite the market’s shift to a more bearish outlook on rate cuts, there is a positive takeaway in the financial market’s resilience. Stocks have held up well, and volatility remains low despite the changes in rate cut expectations. The overall sentiment is that the economy is on solid footing, and the Fed will proceed cautiously with rate cuts based on incoming economic data.