Schroders: Markets may be overestimating the pace of U.S. rate cuts
After more than a year of interest-rate hikes by the U.S. Federal Reserve (Fed), heightened inflation, robust consumer spending and a heated labor market in the United States have finally shown signs of cooling in the fourth quarter of 2023, and the U.S. economy has moved into a phase of slower growth, according to Schroders.
While inflation remains under control, this scenario is expected to allow for more flexibility for the Fed to adjust its monetary policy in 2024. Unless an unforeseeable “black swan” event happens, financial markets seem to be under the consensus that the United States will likely cut rates in 2024.
While such market expectations are currently being reflected in interest rates and stock prices, it seems unlikely for the Fed to loosen its policy stance all at once. Investors should therefore exercise caution and not be overly optimistic about any rate cuts in the United States during the first half of 2024.
Investors might want to note t