- It looks increasingly unlikely that the Federal Reserve will be cutting interest rates after a batch of stronger-than-expected economic data coupled with fresh commentary from policymakers.
- Economic growth is at least stable if not on the rise, while inflation is ever-present.
- Central bankers still lack the confidence to cut and even an unspecified few say they could be open to hiking if inflation gets worse.
Investors likely will have to sweat out a summer during which it looks increasingly improbable that the Federal Reserve will be cutting interest rates.
A batch of stronger-than-expected economic data coupled with fresh commentary from policymakers is pointing away from any near-term policy easing. Traders this week again shifted futures pricing, moving away from the likelihood of a reduction in rates in September and now anticipating just one cut by the end of the year.
The broader reaction was not pleasant, with stocks suffering their worst day of 2024 on Thursday and the Dow Jones Industrial Average breaking what had been a five-week winning streak ahead of the Memorial Day break.
“The economy may not be cooling off as much as the Fed would like,” said Quincy Krosby, chief global strategist at LPL Financial. “The market takes every bit of data and translates it to how the Fed sees it. So if the Fed is data dependent, the market is probably more data dependent.”