Federal Reserve To Cut Rates In July

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Federal Reserve To Cut Rates In July

Federal Reserve To Cut Rates In July, According To Citi

The core PCE inflation for March showed a strong reading & thus has increased the chances of a Fed rate cut in July, according to Citi analysts.

The Core PCE inflation showed a 2.8% increase y/y and around 0.32% m/m during March 2024. According to Citi, this will compel the Federal Reserve to actually cut the interest rate for the first time in several years.

As far as the annual rate of core PCE inflation is concerned, it was mostly in line with forecasts and was not a surprise. However, Citi's m/m reading during March was way higher than the forecasts.

Strong Core Pce Surprises Everyone

Now, there's just April's inflation data left before the FOMC's June meeting. This means there's a higher chance that the Fed will wait until the July meeting to gain more confidence in the fact that inflation is indeed slowing down.

As far as the Citi analysts are concerned, there's no chance of a rate cut at the May and June meeting. According to them, the economic data till then will not be enough to provide confidence to the Federal Reserve.

Citi experts are now eyeing the first rate cut during the July meeting. For the entire year 2024, the rate cuts will be worth around 100 bps or around 1.0%.

If the upcoming data releases show a weak labor market and weak activity, the chance of a June rate cut will increase. In March, the spending remained strong, but the services appear to be more vulnerable as only the healthcare sector is supporting it.

Meanwhile, Evercore ISI added that the core price and headline data were in line with their expectations. They added that the upcoming Payroll data for April will show a 200K print with an unemployment rate of 3.7%.

The bottom line is that the rate cuts have now moved from June to July, according to Citi. And when we look at the last few months, it will not be wrong to assume that the rate cuts campaign could receive another setback.

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