The Fed will not cut interest rates at all this year, and this call is growing on Wall Street

Finance Associated Press

2024-06-11 14:47Published on the official account of Cailianpress, a subsidiary of Shanghai Shanghai Poster Industry Group

Finance Associated Press, June 11 (Editor Huang Junzhi) After the latest jobs report almost completely shattered hopes of a "first drop in July", some analysts further predicted that the Federal Reserve would not cut interest rates at all this year.

This is more pessimistic than what investors are currently betting on, as the CME Fed Watch tool shows that the market is currently pricing in at least one 25bp rate cut in 2024. This is a huge shift because just at the beginning of the year, the market was expecting the Fed to cut interest rates seven times this year.

However, according to Lori Calvasina, head of U.S. equity strategy at Royal Bank of Canada (RBC), even a single rate cut is too much. When the U.S. stock market continues to digest expectations of monetary policy easing, and the Fed ultimately fails to act, then the U.S. stock market may fall.

If there are no rate cuts this year, inflation remains trickier than expected and Treasury yields remain high, then the benchmark S&P 500 could fall to a low of 4,900, down 8.6% from current levels, she said.

Other analysts have also pointed out that the Fed has a reason to keep interest rates higher for longer.

Ed Yardeni, president of long-term Wall Street bull and investment advisory firm Yardeni Research, said the Fed should "take a holiday" and keep interest rates unchanged until 2024. In his opinion, the central bank has succeeded in normalizing interest rates to the level they should be, and in doing so, it has not harmed the economy.

"If they lower interest rates when they don't have to, they could cause the stock market to crash, which will create other problems, like we saw in the late '90s – the bursting of the stock market bubble." He said.

He also added that the market could expect one or two rate cuts in the next 12 months, but never before the end of the year.

Meanwhile, Catalyst Capital analyst David Miller also believes that the Fed should not cut interest rates in 2024, citing the fact that it will lead to higher inflation.

Of course, there are those who hold the opposite view. Mark Zandi, chief economist at Moody's, warned on Monday that the longer interest rates remain high, the more likely the economy will collapse.

"In my mind's eye, the system is like an engine, and it shakes very hard under the pressure of higher interest rates. So far, with the help of some "duct tape", including the Federal Reserve and banking regulators, it has remained stable. But how long will this last? He said.

(Finance Associated Press Huang Junzhi)

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