Market: A member of the Fed pleads for a first rate cut only at the end of the year

(BFM Bourse) – The president of the Atlanta Fed, Raphael Bostic, estimated this Wednesday that the persistence of inflation risked forcing the American central bank to only lower its rates at the end of the year.

A member of the American Federal Reserve (Fed) has dampened the expectations of investors, who are still counting on three rate cuts from the American central bank in 2024, according to the CME Group’s FedWatch tool.

In an interview with the American television channel CNBC, the president of the Atlanta Fed, Raphael Bostic, expressed doubts about the slowdown in inflation in the United States and does not see rate cuts before the end of the year.

Inflation will fall “slower than many had anticipated,” he declared on CNBC.

“If the economy performs as I expect, that is, GDP and unemployment remain robust and inflation slowly declines over the course of the year, I think it would be appropriate for us to begin to decline at the end of the year, in the fourth quarter”, continued Raphael Bostic. The central banker added that the Fed would see what the statistics say in any case.

Renewed tensions on bonds

Following this declaration, renewed tension is observed on American bonds. The rate on the ten-year bond, which was stable shortly before Raphael Bostic’s intervention, increased by 6 basis points, or 0.06 percentage points, around 3:45 p.m.

At the end of March, during the Fed’s last monetary policy meeting, the “dots plots”, that is to say the economic projections of the members of the central bank, suggested several rate cuts this year.

The median of members’ forecasts was 75 basis points of rate cuts (0.75 percentage points) for the year 2024, which corresponds to three 25 basis point cuts.

Fed Chairman Jerome Powell is due to speak at 6:10 p.m. this Wednesday as part of a forum organized in California.

Julien Marion – ©2024 BFM Bourse

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