Economists say Fed will stay put for longer

The upward surprise in producer prices in the US has strengthened the idea that the Fed will postpone the interest rate cut. Nomura Holdings economists announced that they have postponed their expectation of the first interest rate cut, which was previously June, to July after the PPI data, and that they expect two interest rate cuts in 2024, the other in December. Pantheon Macroeconomics Chief Economist Ian Shepherdson, who postponed the interest rate cut expectation to June, predicted that the Fed's preferred inflation indicator, core PCE, will rise by 0.4 percent monthly after the high PPI data. This forecast means the fastest monthly core PCE increase in the last year. According to some pessimistic economists, the first interest rate cut may come towards the end of the year. Santander US Capital Markets US Chief Economist Stephen Stanley expects the Fed to keep interest rates unchanged until November. Stanley commented in his note, “Six weeks ago, the FOMC was more confident that inflation would return to 2%. Since then, there has been nothing but bad news on the inflation front.” FHN Financial economists Chris Low and Mark Streiber also said they expect the Fed to remain in a tight stance for “as long as producer inflation stabilizes or rises.”