Top 10 Influencers in 2024Commentary on the Fed's Policy Action | Dean Baker, a researcher at the Center for Economic and Policy Research, said that the Fed has finally acknowledged the softening of the labor market and responded with aggressive interest rate cuts, which is a positive sign. Given that there is no possibility of reigniting inflation, such a strong push to support the labor market comes at almost no cost. At the same time, this also benefits the housing market, as millions of Americans had previously abandoned home-buying plans due to excessively high mortgage rates. Under the influence of this policy action, there is little further downside for the U.S. financial market.
The Federal Reserve sharply cut interest rates by 50 basis points! The target range for the federal funds rate was lowered to 4.75%-5%.
U.S. stocks surged in the short term! Gold prices continue to hit new highs!
The U.S. has officially entered a rate-cutting cycle, marking the first rate cut since the Federal Reserve initiated this tightening cycle in March 2022.
From March 2022 to July 2023, the Federal Reserve raised interest rates 11 times consecutively over more than a year, cumulatively increasing rates by 525 basis points. Since July 2023, it has held rates steady for eight consecutive meetings, keeping policy rates at their highest level since 2001.
Comment: Bullish on financial markets.
Due to the rate cut, corresponding economic indicators are also expected to change.
Interest rates:
The Federal Reserve expects the federal funds rate to be 4.4% by the end of 2024, compared to 5.1% in June.
It expects the federal funds rate to be 3.4% by the end of 2025, compared to 4.1% in June.
Inflation:
Core PCE inflation is expected to be 2.6% in 2024, compared to 2.8% in June.
Core PCE inflation is expected to be 2.2% in 2025, compared to 2.3% in June.
PCE inflation is expected to be 2.3% in 2024, compared to 2.6% in June.
PCE inflation is expected to be 2.1% in 2025, compared to 2.3% in June.
(Long-term target is 2.0%)
GDP:
The Federal Reserve expects U.S. GDP growth to be 2.0% in 2024, compared to 2.1% in June.
It expects U.S. GDP growth to be 2.0% in 2025, compared to 2.0% in June.
Unemployment rate:
The Federal Reserve expects the unemployment rate to be 4.4% in 2024, compared to 4.0% in June.
It expects the unemployment rate to be 4.4% in 2025, compared to 4.2% in June.
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