The Fed will also issue new forecasts. In December, Fed policymakers expected the key interest rate to average 4.6% for the year. That suggests about three rate cuts in 2024. It will now be interesting to see whether the Fed sticks to those expectations — or whether, in light of stubborn inflation, it will now expect smaller rate cuts this year. Some analysts expect the first rate cut to take place only at the next meeting in June, while others expect only at the meeting at the end of July.
It is important for the Fed to find the right balance. Because if interest rates are too high, there is a risk of a recession. As expected, the Fed's rapid interest rate increases dampened growth in the largest economy. But US economic data surprised economists positively – and perhaps central bankers as well. Good economic data reduces pressure on the Fed to cut interest rates quickly and dramatically. The New York Times describes the central bank's approach as “an unexpectedly painless process so far.” The newspaper quoted analyst Joseph Davies of Vanguard Asset Management as saying: “It is becoming increasingly likely that (central bank governors) will not cut interest rates at all this year.”
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