Fed: First cut in June still likely – Commerzbank

The US Federal Reserve is moving closer to cutting interest rates. A first move at the meeting in June is still likely if the next inflation data show progress, economists at Commerzbank say. 

Fed wants to gain more certainty that inflation has really been beaten

While the Fed is moving towards lowering interest rates, it still needs more certainty that inflation will fall to 2% in the longer term. After the latest surprisingly high data, it is unlikely to have this confidence at its next meeting on May 1. The earliest date for a first rate cut is, therefore, the meeting in June, where we expect a move of 25 basis points as before. However, if the next inflation report is clearly disappointing again, the Fed could wait longer. 

In any case, we only see relatively limited potential for rate cuts totalling 125 basis points which would bring the upper bound of the target range to 4.25% in spring 2025. The reason is that inflation is likely to remain above target in the longer term due to the tight labor market and structural factors that boost inflation such as the worsening demographics and increased protectionism.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Related Articles

Back to top button