Fed likely to delay cuts further

The US Federal Reserve will release its statement at 6:00pm GMT on Wednesday. It is anticipated that the central bank will maintain interest rates within the 5.25-5.5% range, suggesting that September may mark the earliest consideration for a rate cut. Market attention will be directed towards the updated dot plot, providing insights into individual members' perspectives on interest rate trajectories. In March, the Fed indicated a predominant view of three rate reductions for the year, with an additional three cuts expected in 2025. However, given the persistent inflation and better-than-expected employment figures, there's an anticipation of revisions in the upcoming projections.

There may be two cuts in 2024 and four in 2025, diverging from the previous anticipation of three cuts in both years. This delicate balance is underscored by a recent Bloomberg survey, revealing that 41% of respondents anticipate two cuts in 2024, while an equal percentage expect just one or none. The Fed's hesitation to project only one 25bp rate cut for 2024 stems from concerns about potential impacts on GDP growth and unemployment rates. The importance of data-driven decisions will likely be reiterated, especially given the potential for shifts in median projections of the "dot plot".

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Russell Shor

Senior Market Specialist

Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.

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