S&P Global Market Intelligence anticipates two US Fed rate cuts this year

New Delhi [India], September 12 (ANI): American central bank US Federal Reserve will most likely cut key interest rates twice this year — once this month and again in December, anticipates S&P Global Market Intelligence.

“We expect two rate cuts this year — this month and again in December — as the Federal Reserve begins the process of easing policy gradually before cutting rates at every meeting beginning in the second quarter of next year,” said Ben Herzon, Senior US Economist, S&P Global Market Intelligence, a financial information and analytics firm.

The US Fed’s next meeting takes place September 17-18, 2024.

The trend in the unemployment rate has steepened in recent months, the job openings rate has declined to pre-pandemic levels, and wage inflation is slowing in the US.

According to Herzon, these developments will prompt the Federal Reserve to begin cutting the federal funds rate target range later this month.

S&P Global Market Intelligence looks for 2.6 per cent GDP growth in the US this year, followed by 1.8 per cent growth next year. The former is unchanged from last month’s forecast, while the latter is up 0.1 percentage point.

US Federal Reserve Chair Jerome Powell recently indicated that it was time for the US central bank to reduce interest rates as inflation rates aligned with its target.

Addressing the much-awaited Jackson Hole Symposium last month, Powell said that “the time has come for policy to adjust” but stopped short of giving a hint on the quantum of interest rate cut.

Faced with high inflation during the COVID-19 pandemic, the US monetary policy committee raised the policy rate by 425 basis points in 2022 and another 100 basis points in 2023 as part of its commitment to restoring price stability. It held the policy rate at its current restrictive level since July 2023.

Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline.

For much of the past three years, inflation ran well above the US central bank’s 2 per cent goal, and labour market conditions were extremely tight.