Markets Are Now Pricing In Just 1 Fed’s Rate Cut for 2024

As per Bloomberg data, the market is currently factoring in only one interest rate reduction for the entirety of 2024. This is a notable decrease from the two cuts that were being anticipated just ten days earlier, following the April Consumer Price Index (CPI) data reflecting a 3.4% inflation rate.

The latest development aligns with the recent US Purchasing Managers’ Index (PMI) report on Thursday, which indicated that inflation pressures persistently persist. Market expectations have shifted, with five interest rate cuts removed from the equation since January.

Goldman Sachs CEO David Solomon expressed a contrasting view on Wednesday, forecasting no reductions in interest rates for the year ahead.

Meanwhile, data released on Friday revealed that consumer sentiment experienced a substantial 10.5% decline in May, reaching its lowest point in nearly five months. The final May figures from the Michigan Index of Consumer Sentiment displayed a drop to 69.1, marking an over eight-point decrease from April. This downturn follows a relatively stagnant trend in consumer sentiment throughout the year.

Survey Director Joanne Hsu highlighted that consumer concerns primarily revolve around job security, with ongoing apprehensions surrounding elevated interest rates. Notably, while the reading fell below expectations, Hsu pointed out that sentiment remains 20% higher than the same period last year and well above the record low recorded during the peak of inflationary pressures in June 2022.

The survey also indicated an upward trajectory in inflation expectations, with consumers anticipating a 3.3% increase in prices over the next year. This uptick surpasses the previous month’s figures and lands above the pre-pandemic range. Federal Reserve officials closely monitor consumer inflation expectations as a barometer for assessing the trajectory of price pressures.