Bank Of America Expects Fed's First Rate Cut To Be Delayed Until June After Central Bank's Surprisingly Cautious Guidance

In an unexpected turn of events, Bank of America anticipates the Federal Reserve’s first interest-rate cut of 2024 to happen in June, not March, following unexpectedly hawkish comments from the central bank.

What Happened: The Federal Open Market Committee (FOMC) meeting on Wednesday saw the central bank maintain interest rates, stating that a March cut was unlikely. “I don’t think it is likely that the committee will reach a level of confidence by the time of the March meeting to identify March as the time to [cut interest rates],” said Fed Chair Jerome Powell, as reported by Business Insider.

BofA expects a “later and faster” pace of rate cuts to commence in 2024. “Based on the outcome of the January FOMC meeting, we now look for the rate cut cycle to begin in June and expect 25 bp of rate cuts in June, September, and December,” BofA strategists stated. Nevertheless, traders predict a 72% chance of the Fed slashing rates at least six times by the end of 2024, according to the CME FedWatch tool.

See Also: Institutional Investors Flee Stocks At Second-Highest Pace Since 2008 Despite Market Boom: Where Is Their

Why It Matters: The Federal Reserve’s decision has left investors who anticipated a swift pace of rate cuts this year dismayed, triggering the S&P 500’s most significant drop of the year. A report highlighted the market’s belief that the Fed had made an error, with reluctance to cut rates unsettling investors.

Earlier, the Fed’s statement had dampened expectations for immediate rate cuts, leading to a drop in stocks. After a strong signal from Fed Chair Jerome PowellGoldman Sachs also moved its prediction for the first rate cut from March to May.

However, concerns exist that rapid Fed rate cuts could lead to a recession. The central bank continues to maintain its Fed Funds rate target at 5.25%-5.5%, the highest since 2001. The potential pushback on a March rate cut could also negatively impact homeowners, as mortgage rates fall.

Read Next: JPMorgan’s Jamie Dimon Raises Alarm Over Potential Global Market ‘Rebellion’ Due To Record US Debt: ‘That Hockey Stick Doesn’t Start Yet’

Photo courtesy of the Federal Reserve.


Engineered by Benzinga Neuro, Edited by Kaustubh Bagalkote


The GPT-4-based Benzinga Neuro content generation system exploits the extensive Benzinga Ecosystem, including native data, APIs, and more to create comprehensive and timely stories for you. Learn more.


Market News and Data brought to you by Benzinga APIs
Comments
Loading...
Posted In: NewsEconomicsFederal ReserveBank of AmericaFedFederal ReserveGoldman SachsInterest-Rate CutJerome PowellKaustubh Bagalkotestock market
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!