As recent as the last FOMC meeting a month ago, Fed Chair Jerome Powell stated in no uncertain terms that as an institution, they would categorically not be lowering rates until inflation in the United Stated of America dropped to 2.0%. Just yesterday, Mr. Powell backpedaled a bit and said that they will begin cutting rates “well in advance” of that target to account for lags in the economy. Despite inflation slowing down somewhat in recent months, it’s not decelerating as quickly as other key economic data points and as such, the Open Market Committee concludes it prudent to get a jump on attenuating the next crisis before it gets here by positioning interest rates in a more neutral zone.
At the moment, the probabilities for a 1/4% rate drop by the Fed are at 10.3% at the January 31st and 62.7% at the March 20th FOMC meetings. An anonymous survey of the 19 FOMC members yesterday showed that two Governors don’t plan on any rate cuts in 2024, one sees rates dropping by 1.5%, and most of them agree that the judicious measure is to lop off somewhere between 1/2% to a full 1% over the next 12 months.
