When will Fed cut rates? As US economy flexes its muscles, maybe later or not at all

FILE - Federal Reserve chair Jerome Powell speaks during a news conference at the Federal Reserve in Washington, March 20, 2024. With the economy still humming, consumers spending freely and employers hiring briskly, some economists are beginning to wonder whether the Fed might decide it doesnt need to cut rates until late this year.

Some analysts responded by arguing that it's clear the last thing the economy needs now is more stimulus from lower rates. Since then, Friday's jobs data, combined with an unexpectedly buoyant report showing that factory output is expanding again after months of contracting, suggested that the economy is extending an unexpected run of healthy growth. Despite the Fed's aggressive streak of rate hikes in 2022 and 2023, which sent mortgage rates and other borrowing costs surging, the economy is defying long-standing expectations that it would weaken.

Raphael Bostic, head of the Atlanta Fed, said he favored just one rate cut this year — and not until the final three months. And Neel Kashkari, president of the Minneapolis Fed, sent stock prices falling Thursday afternoon after raising the possibility that the Fed might not cut at all this year. As a result, the government's upcoming reports on inflation will be scrutinized for any signs that inflation is easing further. Wednesday's report on the consumer price index is expected to show that core prices rose 0.3% from February to March, which generally is too fast for the Fed's liking.

“There are significantly more people working,” Powell said in a discussion at Stanford University this week. “It's a bigger economy, rather than a tighter one.”

Source: Financial Digest (financialdigest.net)

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