No Rate Cut for Now - US Federal Reserve

- Current Rates: No change, staying at 5.25%-5.50%.

- Future Cuts: Only one cut expected this year (2024), but four cuts anticipated in 2025.

- Inflation: Fed Chair Jerome Powell noted recent inflation data looks better, but more good news is needed to feel confident about hitting the 2% target.

- Economic Projections: Fed raised inflation forecasts slightly and kept economic growth and unemployment forecasts steady.

- Global Context: Other central banks, like the European Central Bank and Bank of Canada, have started to cut rates.

1. Rate Cut Timing: UBS predicts that if there’s only one cut, it would likely happen in November or December. Goldman Sachs expects two cuts, with the first in September. Bank of America foresees one cut, while Citigroup considers the possibility of three but expects the dot plot to indicate two.

2. Economic Growth and Inflation: Economists expect the Fed to lower its GDP growth outlook and raise the expected inflation level from previous projections. Recent data, like the strong payrolls report, indicate wage growth at 4.1% annually, above the Fed’s unofficial 3.3% target, complicating the path to rate cuts.
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The Fed is playing it safe, keeping rates high to fight inflation but ready to adjust if the economic landscape changes. It seems like they're waiting for more consistent data before making significant moves.

For us investors, this means continued high borrowing costs for now. But with the prospect of cuts in 2025, we could see additional liquidity entering the stock market (if it’s not priced in already).

What do you think? Are you optimistic about the Fed’s cautious approach, or do you think they should cut rates sooner?