For the first time this year, the markets are now only seeing three interest rate cuts in 2024, following economic data last week that led the markets to believe inflation will not go anywhere soon.
At the start of this year, markets believed that there could be 6-7 rate cuts in total by the end of 2024 with the first cut to be as soon as this month. However, the U.S. Federal Reserve cautiously predicted three cuts in total at the first meeting in January.
This is the first time that markets are on the same page as the central bank’s guidance.
The probability for a rate cut at the meeting this week is down to 2% and the odds of a cut in May are down to around 7%. Chance for a cut in June remains firm at around 55%, according to the CME FedWatch Tool.
The next rate cut after that will be in September and the final one is expected to be in December.
In their latest comments, Goldman Sachs and the Bank of America also expected three rate cuts as well.
Just last week, US producer price index (PPI), a gauge to measure pipeline costs for raw, intermediate and finished goods, accelerated at a faster-than-expected pace in February, reiterating the market of sticky inflation and erasing hopes for early rate cuts by the Federal Reserve.
Wholesale prices rose to 1.6% YoY in February, higher than a 1.2% expected rise by economists and 0.9% in January. On a monthly basis, PPI jumped 0.6%, compared to 0.3% expected and also a 0.3% increase in January.
Meanwhile, core PPI was 2.0%, higher than a 1.9% increase expected by economists.
A week before that, the consumer price index reported an increase by 3.2% year over year in February, according to data released Tuesday by the Bureau of Labor Statistics. It was slightly higher than the 3.1% expected by economists and the pace it set in January. On a monthly basis, the consumer price rose 0.4% as expected.
Meanwhile, core inflation, which excludes the volatile food and energy prices, rose 3.8% YoY, which was down from 3.9% in January, but higher than a 3.7% rise expected by economists.
On a monthly basis, the core consumer price rose 0.4%, compared to 0.3% expected.
