The Federal Reserve is due to have its second Federal Open Market Committee (FOMC) meeting of 2024 on March 19-20, and after a bumpy couple of years, the majority of Finder’s panel says the Fed will hold rates at their current level (5.33%).
There has been a lot of speculation that the Fed will cut rates up to six times in 2024, but none of our panel members sees that first cut coming in March.
What will the Fed do with interest rates at its next meeting?
The panel members unanimously expect the Fed will hold rates at its next meeting, with all saying rates will hold.
Cynthia Wylie, partner and cofounder of the Project Consultant, says that while she doesn’t expect cuts to come in March 2024, they are imminent.
The FED has stated that they expect to cut rates by 75 basis points in 2024. However, due to the robust job growth in February over expectations, I think they will hold for March.
Faculty Member at NYU, Howard Yaruss, also expects that rates will come down as “inflation has stabilized close to the Fed’s target and I doubt the Fed will want to go into the months before the election being accused of keeping rates too high.”
Investments writer at Finder.com, Frank Corva, thinks cuts are coming but at the cost of cracks in financial systems:
“I think the Fed will hold rates until something in the banking or broader financial system breaks. Then, it will be forced to cut rates, as it will need to inject liquidity into the system so to avoid a deflationary debt spiral.”
The FED has stated that they expect to cut rates by 75 basis points in 2024. However, due to the robust job growth in February over expectations, I think they will hold for March.
What should the Fed do with rates at the next meeting?
Inflation is relatively stable and I think it would help with some brewing interest squeeze problems with the banks regarding commercial real estate.
The longer the Fed keeps rates high, the more it risks unnecessarily slowing the economy.
What is your prediction regarding rates?
Inflation has stabilized close to the Fed’s target and I doubt the Fed will want to go into the months before the election being accused of keeping rates too high.
What should the Fed do with rates at the next meeting?
Inflation has definitely abated and the longer the Fed keeps rates high, the more it risks unnecessarily slowing the economy.
Frank Corva
Senior analyst for digital assets and Finder.com
Hold rates
Holding rates high while the US debt-to-GDP ration is 130% has proven to be a dangerous endeavor.
What is your prediction regarding rates?
I think the Fed will hold rates until something in the banking or broader financial system breaks. Then, it will be forced to cut rates, as it will need to inject liquidity into the system so to avoid a deflationary debt spiral.
What should the Fed do with rates at the next meeting?
Rates are high enough. The US is currently paying over $1 trillion in interest on the national debt. Higher rates me a higher interest rate on the national debt, and the US can’t afford that.
Inflation’s moderation will continue and give the Fed the green light to loosen policy.
What should the Fed do with rates at the next meeting?
The economy has held up well and shows no clear signs of needing a stimulative monetary policy. Though it would be unwise to wait until it’s too late, March is too early.
Economy is growing above trend and inflation is above 2% target.
What should the Fed do with rates at the next meeting?
Risk of inflation in 2025 would be higher with unemployment rate less than 4.0% and growth above trend if FOMC cuts now.
Looking further ahead, most of the panel sees the Fed holding rates until either the middle or the end of 2024.
How much should the Fed increase or decrease rates?
The majority of the panel (60%) believe that the Fed decision to hold rates is the correct one. The remaining panel members (40%) say that the Fed should be cutting rates by 0.25% at the March 2024 meeting.
When will inflation return to 2%?
If you were hoping for the inflation rate (currently at 3.2%) to return to the Bank’s target range of 2% anytime soon, our panel has some bad news for you, with two in five (40%) saying that we won’t see inflation hit this mark until Q1 2025 or beyond. Around a fifth (20%) see things easing by Q2 2024, Q4 2024 or Q1 2025.
Economic indicators
From the perspective of individual Americans, our panel has a fairly pessimistic outlook for a range of economic indicators over the next six months. All of the panel sees household debt (100%), cost of living (60%), wage growth (60%) and house prices (60%) rising over the next six months, as employment (60%) go in the other direction.
Will the US enter a recession in 2024?
As to whether the US will experience a recession in 2024, the majority (60%) say it won’t happen.
Jim Welsh, Portfolio MGR and Publisher at Macro Tides, said the US will very likely enter a recession in Q1 2025.
“Higher real rates, tighter lending standards, job growth slowing, commercial real estate loan losses leading bank closures.”
Similarly, Finder’s Investments writer Frank COrva says a recession is somewhat likely by Q4 2024:
With the Bank Term Funding Program (BTFP) having ended on March 11, 2024, I expect a banking crisis to ensue somewhere within the next two quarters. Most regional banks are overexposed to both commercial real estate, a market that’s been in decline since COVID, and long-term US treasuries, which continue to trade at a discount. Holding both of these types of assets will eventually catch up with the banks, which will become insolvent if they aren’t bailed out.
Soft economic indicators
The panel is trending fairly neutral to negative on how they feel about the future of various soft economic indicators.
Upcoming FOMC 2024 meetings
The January 30-31, 2024 FOMC meeting is the first of eight FOMC meetings in 2024.
Richard Laycock is Finder’s NYC-based senior content marketing manager & insights editor, spending the last decade data diving, writing and editing articles about all things personal finance. His musings can be found across the web including on NASDAQ, MoneyMag, Yahoo Finance and Travel Weekly. Richard studied Media at Macquarie University, including a semester abroad at The Missouri School of Journalism (MIZZOU).
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