Raphael Bostic, the president of the Atlanta Federal Reserve, who has traditionally taken a dovish stance, stated today that he expects only one interest rate cut in 2024. He believes that the recent strong job market and persistent inflation data in the United States may prolong high interest rates.
The U.S. Bureau of Labor Statistics reported last Friday that nonfarm payrolls added 303,000 jobs in March, far exceeding the market’s expectation of 212,000 jobs, indicating a robust labor market and the resilience of the U.S. economy. Along with the recent inflation data showing no significant cooling, U.S. bond yields have risen significantly, leading to a more conservative attitude towards interest rate cuts in the market. It is predicted that Federal Reserve officials may keep interest rates at a high level for a longer period of time than expected.
Some Federal Reserve officials have also publicly stated recently that the number of interest rate cuts this year may be lower than the three cuts predicted by most officials at last month’s rate meeting. This includes Raphael Bostic, the president of the Atlanta Federal Reserve, who has traditionally taken a dovish stance and has voting rights. In an interview with Yahoo Finance today, he expressed the expectation of only one interest rate cut in 2024, but did not rule out the possibility of two interest rate cuts or no interest rate cuts at all depending on the direction of the U.S. economy and inflation.
When asked about the prospect of no interest rate cuts at all this year, Bostic stated that he remains open to changing his viewpoint. He said, “If I start receiving different signals that indicate a lot of pain is coming in the labor market, then I would be open to changing our policy stance and maybe cutting rates earlier.”
According to the Fed Watch data from CME Group, the probability of the Fed keeping rates unchanged in May at the current range of 5.25% to 5.50% is nearly 94%, while the probability of a 1% rate cut in June has fallen to 51% (compared to 57% a week ago).
In addition, according to the December federal funds futures contract prices from the London Stock Exchange Group (LSEG) on Monday, the market expects the Fed to cut interest rates by approximately 60 basis points this year, much lower than the 150 basis points at the beginning of the year, and the estimated decline is the lowest since October last year.
It is worth noting that, according to Business Insider, analysts from Bank of America warned in a report last week that if the Federal Reserve does not cut interest rates before June, the door to rate cuts for this year will close and rate cuts will be postponed until March 2025. However, the analysts still expect three rate cuts this year and cite recent dovish comments from Fed Chairman Powell, suggesting that a rate cut in June is still under consideration.
Investors are currently closely watching the inflation-related data to be released this week, including the March CPI on the evening of the 10th and the Producer Price Index (PPI) data on the 11th.