RBC have revised their forecast for the Federal Open Market Committee (FOMC) this year.
- A resilient U.S. economy and signs of reacceleration in inflation look likely to derail Fed plans to cut interest rates by 75 basis points this year – we now look for just one 25 basis point cut in December.
- The U.S. economy ... GDP tracking another solid increase in Q1 and employment rising quickly despite high interest rates
- More importantly, slowing inflation trends last year are showing worrying signs of reversing and reaccelerating in early 2024 – growth in the Fed’s “supercore” inflation measure (core services ex-rent) doubled to 8.2% (annualized) in March relative to last December.
- Federal Reserve officials have so far mostly stuck with the guidance that interest rates can begin to move lower this year. But the run of stronger inflation prints makes cuts by the summer look increasingly unlikely.
- We now expect the Fed to cut the fed funds target range just once this year in December versus a June start we previously assumed.
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It's a cascade of cuts to forecasts:
- Deutsche Bank expects a December Federal Reserve rate cut (were previously tipping June)
- Bank of America expects a December Federal Reserve rate cut (previously were tipping June)
Fed Chair Powell
