Due to market concerns that the Federal Reserve may delay rate cuts and reduce the number of rate cuts, all four major US stock indices fell on Tuesday, and Bitcoin also fell below the $65,000 mark. Loretta Mester, President of the Federal Reserve Bank of Cleveland, stated on Tuesday that she still expects the Federal Reserve to cut interest rates this year, possibly three times, but she does not believe that a rate cut is possible in May.
Recently, the US inflation data has not shown a significant cooling, causing the market to lower its bets on the number of rate cuts by the Federal Reserve this year. Some economists and professional investors believe that even if the Federal Reserve cuts rates before the end of this year, the number of rate cuts may be lower than the current expectations of three times, at most once, or even no rate cuts at all.
Fed officials are not in a hurry to cut rates. Loretta Mester, a voting member of the Federal Open Market Committee (FOMC) and President of the Federal Reserve Bank of Cleveland, who will retire in June this year, stated on Tuesday that she wants to see more evidence that inflation is cooling before cutting rates. However, she mentioned that recent data generally aligns with her expectations of a slowdown in price growth.
In Loretta Mester’s view, the higher-than-expected inflation data since the beginning of this year largely proves that the road to combating inflation will not be smooth all the way. She still believes that inflation will continue to move towards the Federal Reserve’s 2% target, but the decline will be slower than last year. Loretta Mester mentioned that she expects the possibility of three rate cuts this year. As to whether it is necessary to reduce the number of rate cuts, it is difficult to say now. She believes that there is not enough evidence to support a rate cut at the interest rate decision meeting on April 30 to May 1, but she does not rule out the possibility of a rate cut in June.
Loretta Mester stated that she estimates that the US inflation rate this year will be higher than the median expectation of Federal Reserve officials. She reiterated that rate cuts will begin later this year, but raised the expected federal funds rate from 2.5% to 3%.
Mary Daly, President of the Federal Reserve Bank of San Francisco, stated on Tuesday that she still believes that the expectation of three rate cuts in 2024 is reasonable, but considering the strong economy, there is currently no urgency to cut rates.
Due to market concerns about the prospect of rate cuts, all four major US stock indices fell on the 2nd:
– The Dow Jones Industrial Average fell 396.61 points or 1%, closing at 39,170.24.
– The Nasdaq fell 156.38 points or 0.95%, closing at 16,240.45.
– The S&P 500 fell 37.96 points or 0.72%, closing at 5,205.81.
– The Philadelphia Semiconductor Index fell 75.16 points or 1.51%, closing at 4,886.94.
Bitcoin was also affected by the uncertain prospect of rate cuts in the cryptocurrency market, falling 7% in a single day. It reached a low of $64,493 at 8 am today and slightly rebounded to $65,851 before the deadline, with a 1.05% drop in the past 24 hours.