ING Predicts Fed to Cut Interest Rates
According to financial giant ING’s chief international economist, James Knightley, the Federal Reserve is expected to begin cutting interest rates in the second quarter of next year. Knightley has based his prediction on a range of factors, including modest U.S. economic growth, cooling inflation, and a labor market that is cooling but not collapsing.
Modest Growth and Cooling Inflation
Knightley points to recent U.S. data that reveals modest growth, cooling inflation, and a labor market that is showing signs of slowing down. He believes that these factors support the Fed’s decision to cut interest rates. In October, both incomes and the Core PCE deflator rose 0.2% month-on-month, leading to a decrease in the annual rate of core inflation from 3.7% to 3.5%.
Concerns over Household Incomes
While spending remains stable, Knightley expresses concerns over the weakening outlook for household incomes. He highlights the rise in credit card delinquencies and the financial pressure caused by student loan repayments as factors contributing to this concern. He believes that the weakness in real household disposable incomes will be a key obstacle to growth in early 2024.
Fed Rate Cut Projections
Based on their analysis, ING predicts that the Federal Reserve will implement 150 basis points (bp) of rate cuts in 2024 and an additional 100bp in early 2025. Knightley suggests that the Fed will start making these cuts from the second quarter of next year.
Hot Take: ING Forecasts Fed to Cut Interest Rates in 2024
According to ING’s chief international economist, the Federal Reserve will begin cutting interest rates in the second quarter of 2024. This prediction is supported by U.S. economic data, including modest growth, cooling inflation, and a cooling labor market. ING forecasts a total of 250 basis points of rate cuts by early 2025. These projections suggest that the Fed sees no need for further policy tightening and aims to support economic growth.
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