US Federal Reserve Expected to Cut Interest Rates Twice This Year
The US Federal Reserve is likely to reduce key interest rates twice this year, once in September and again in December, according to S&P Global Market Intelligence. Ben Herzon, Senior US Economist at S&P, explained that the steepening unemployment rate, declining job openings, and slowing wage inflation are prompting these cuts.
Upcoming Federal Reserve Meeting
The next meeting of the US Federal Reserve is scheduled for September 17-18, 2024. Herzon anticipates that the Federal Reserve will begin cutting the federal funds rate target range later this month.
Economic Growth Projections
S&P Global Market Intelligence forecasts a 2.6% GDP growth in the US for this year, followed by 1.8% growth next year. The former remains unchanged from last month’s forecast, while the latter is up by 0.1 percentage point.
Statements from Jerome Powell
US Federal Reserve Chair Jerome Powell recently indicated that it was time for the US central bank to reduce interest rates to align with its inflation targets. Speaking at the Jackson Hole Symposium, Powell mentioned that ‘the time has come for policy to adjust’ but did not specify the extent of the rate cuts.
Background on Interest Rate Changes
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 to restore price stability. The policy rate has been held at its current restrictive level since July 2023. Raising interest rates typically helps suppress demand in the economy, aiding in the decline of the inflation rate.
Doubts Revealed
US Federal Reserve -: The US Federal Reserve, often called the Fed, is like the big bank for the United States. It helps control the country’s money and keeps the economy stable.
Interest Rates -: Interest rates are like the extra money you pay when you borrow money from a bank. If the rates are low, borrowing money is cheaper.
S&P Global Market Intelligence -: S&P Global Market Intelligence is a company that studies and gives information about the economy and businesses. They help people understand what’s happening in the financial world.
Ben Herzon -: Ben Herzon is a person who studies the economy in the United States. He works for S&P Global Market Intelligence and helps explain why things are happening in the economy.
Unemployment Rate -: The unemployment rate is the number of people who don’t have jobs. If this number goes up, it means more people are looking for work.
Job Openings -: Job openings are the number of jobs available for people to apply for. If there are fewer job openings, it means there are fewer jobs for people to get.
Wage Inflation -: Wage inflation is when the amount of money people earn from their jobs goes up. If wage inflation slows down, it means people’s salaries are not increasing as quickly.
Jerome Powell -: Jerome Powell is the person in charge of the US Federal Reserve. He helps make important decisions about the country’s money and economy.
Inflation Targets -: Inflation targets are goals set by the Federal Reserve to keep the prices of things we buy from going up too quickly. They want to keep prices stable so that money keeps its value.
Fed’s Meeting -: The Fed’s meeting is when the people in charge of the US Federal Reserve get together to talk about the economy and decide what to do next. Their next meeting is on September 17-18, 2024.
