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Will The Fed Cut Interest Rates This Year?

Will The Fed Cut Interest Rates This Year?

March 03, 2024

Wall Street consistently wonders, “When will the Federal Reserve start cutting interest rates?” However, the more pertinent question is, “What criteria is the Fed looking for before it would consider a rate cut?”

As previously indicated, the Fed hinted in December, 2023, that as many as three rate reductions were possible in 2024. Nonetheless, Chairman Jerome Powell remarked in February that the Federal Reserve wasn't rushing to alter its interest rate strategy. He indicated that his organization is, "not merely looking for better data, but for more good data already pointing to continued cooling inflation," to support a rate decline decision. 

Remember too, that January’s inflation report was a bit hotter than expected, which complicated the Fed’s interest rate decision. That puts a spotlight on February’s Consumer Price Index (CPI) update, scheduled for March 12, as well as the Personal Consumption Expenditures Price Index (the inflation index that is favored by the Fed) on March 29. Will data released at those times support the Fed’s “more good data” narrative?

The next potential announcement for a rate adjustment would be during the Fed's two-day meeting on March 19-20. Beyond that, there are six more scheduled meetings for the year, with the possibility of unscheduled meetings being announced as required. The last instance of such an impromptu meeting occured in March 2020 in response to the pandemic.

The CME Group, based in Chicago, offers a "FedWatch Tool," which presently indicates minimal support for a rate cut in March meeting. Expectations for cuts in May are also not strong, while prospects for changes during June and July scheduled meeting are increased. Realize also that the Fed is supposed to remain independent of political cycles, so it should be unmoved by the upcoming national election when determining the necessity and timing of interest rates adjustments.  

Thus, the question remains: will the Fed indeed lower interest rates in 2024? Speculation is robust, yet the timing remains uncertain. "Savers" will surely welcome any delays, while "investors and borrowers" eagerly desire reductions. At Henry Wealth Management, we advise our clients to remain focused on long-term planning and not allow short-term fluctuations, ones that are welcome and even those that appear to be unwelcome, to dictate strategy. 

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