Mint Quick Edit | Expect a longer wait for a Fed pivot

The forecast of three rate cuts in 2024 that the Fed’s rate-setting panel had put out in March now stands scaled down to just one.
The forecast of three rate cuts in 2024 that the Fed’s rate-setting panel had put out in March now stands scaled down to just one.

Summary

  • The US Federal Reserve’s latest policy decision has again dampened hopes of a rate cut, with its March forecast of three rate cuts in 2024 scaled down to one. To relieve inflation worries that stem from a tight labour market, America should open up wider to immigrants.

Even as anticipation has grown over when the US Federal Reserve will shift its monetary policy to an easier setting, the target seems to be moving farther, with distinctly hawkish sounds emanating from Fed policymakers. The US central bank’s latest policy decision announced by chair Jerome Powell on Wednesday has dampened expectations again. Powell said US inflation has eased but not by as much as required. 

So, the forecast of three rate cuts in 2024 that the Fed’s rate-setting panel had put out in March now stands scaled down to just one. Among the complications faced by the Fed is the peculiar state of America’s labour market. While the relationship of its tightness with general price levels has been under both study and debate, one way to relieve the US economy of wage-driven inflationary pressures would be to open it wider to immigrants. 

Also read: What does Fed's indication of single rate cut mean for Indian IT stocks?

Sadly, domestic US politics pose a big obstacle to this, which means when America will get inflation back down to its 2% target can be a bit like waiting for Godot. Many observers in emerging markets may be sighing that the US isn’t proving as pragmatic as it should be in shoring up its reputation for price stability.

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