Fed decision preview: Zero rate cuts and EURUSD parity in 2024?
Fed decision preview: Zero rate cuts and EURUSD parity in 2024?
Expectations point to the Federal Open Market Committee maintaining interest rates at their current levels in the upcoming decision slated for May 1. However, fixed income markets suggest the possibility of rate cuts surfacing in either the July or September meetings of the FOMC.
Nonetheless, Thursday’s economic activity report ushered in another jolt for investors and Federal Reserve policymakers. They had been bracing for lower inflation to pave the way for substantial interest-rate cuts this summer.
The core price index for personal consumption expenditures in the United States, excluding food and energy, surged by an annualized 3.7% during the first quarter of 2024. This marks an acceleration from the previous three-month period's 2% increase, surpassing the estimated 3.4%.
Recent remarks by Fed Chair Jerome Powell and other policymakers have solidified the conviction that rate cuts won’t materialize in the near term. In fact, there's been discussion about the potential for further hikes if inflation fails to abate.
Given the challenging scenario, where higher interest rates don't appear to be substantially denting the economy, the question arises: What if policymakers opt to maintain current rates throughout 2024 without any cuts? With the divergence in outlook from the Fed and the ECB, can we expect parity to be reached again in the EUR/USD this year?
Expectations point to the Federal Open Market Committee maintaining interest rates at their current levels in the upcoming decision slated for May 1. However, fixed income markets suggest the possibility of rate cuts surfacing in either the July or September meetings of the FOMC.
Nonetheless, Thursday’s economic activity report ushered in another jolt for investors and Federal Reserve policymakers. They had been bracing for lower inflation to pave the way for substantial interest-rate cuts this summer.
The core price index for personal consumption expenditures in the United States, excluding food and energy, surged by an annualized 3.7% during the first quarter of 2024. This marks an acceleration from the previous three-month period's 2% increase, surpassing the estimated 3.4%.
Recent remarks by Fed Chair Jerome Powell and other policymakers have solidified the conviction that rate cuts won’t materialize in the near term. In fact, there's been discussion about the potential for further hikes if inflation fails to abate.
Given the challenging scenario, where higher interest rates don't appear to be substantially denting the economy, the question arises: What if policymakers opt to maintain current rates throughout 2024 without any cuts? With the divergence in outlook from the Fed and the ECB, can we expect parity to be reached again in the EUR/USD this year?
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