Wall Street Economist Predicts Federal Reserve Will Not Lower Rates in 2024
The debate surrounding Federal Reserve policy continues as a top Wall Street economist predicts that interest rates will not be cut in 2024. Torsten Sløk, the chief economist at Apollo, believes that the U.S. economy is strong and that inflationary pressures persist, leading to his forecast adjustment.
One of the primary reasons for Sløk’s prediction is the reacceleration of the economy. He attributes this to the easing of financial conditions caused by the central bank’s shift in policy expectations in December. Additionally, various underlying inflation measures are trending higher, and small businesses are indicating plans to raise prices. Wage inflation remains stubbornly between 4 and 5 percent, and asking rents and home prices are on the rise.
The easing of financial conditions since the Fed’s pivot in 2023 is another factor supporting Sløk’s forecast. Robust initial public offering (IPO) activity, tight credit spreads, and a record stock market all indicate that financial conditions have improved. With these conditions easing significantly, Sløk expects strong nonfarm payrolls and inflation to continue.
After Sløk’s comments made waves in the business media, he reiterated his stance, stating that the monetary authorities would be hesitant to raise interest rates even if inflation appears to be under control according to the financial markets. He points out that inflation is indeed becoming a problem again, with higher-than-expected annual inflation rates and core consumer price indexes remaining elevated.
The debate surrounding Federal Reserve policy has intensified in recent weeks. The futures market has priced in three rate cuts beginning in June, while some experts anticipated as many as six rate cuts. However, there are also voices suggesting that rate hikes should not be ruled out. Former Treasury Secretary Larry Summers believes there is a meaningful chance of a rate hike, and some Fed officials have indicated their willingness to consider rate hikes if inflation stalls or reverses.
Despite these differing opinions, it is unlikely that rate hikes will be implemented anytime soon. The consensus among central bankers is that the economy and labor market are strong enough to allow for patience and further data analysis before making any decisions. Fed officials are closely monitoring economic data, including the February jobs and consumer price index reports, which will influence their future policy decisions.
In conclusion, the Wall Street economist Torsten Sløk predicts that the Federal Reserve will not lower interest rates in 2024 due to a solid economy and persistent inflationary pressures. While there is debate within the market and among experts about potential rate cuts or hikes, the consensus among central bankers is to remain patient and rely on data to make informed decisions. The upcoming FOMC meeting later this month will provide further insights into the Federal Reserve’s stance on monetary policy.
