Economists' Fed forecast

While the market is greatly curious about when the Fed will cut interest rates, there have been differences of opinion among economists. While some economists see a risk that the Fed will start cutting interest rates by March 2025, some economists stated that they continue with their expectations for June and July. While the latest speech by Fed Chair Jerome Powell strengthened the possibility that there will be no interest rate cuts in the near future, the question of when the Fed will start cutting interest rates has become the most fundamental issue in the market. “In my opinion, they need two, probably three months in a row of inflation figures consistent with the 2 percent target. If that’s the level, they could get there in September at the earliest. I don’t foresee a rate cut before that,” said Mark Zandi, Chief Economist at Moody’s Analytics. “Right now, one of my basic scenarios is in September, the other is in December. However, a rate cut is also possible in November,” said Zandi, who believes that the presidential elections could be effective for Fed officials who insist on not being affected by the presidential elections. Economists at Bank of America say there is a real risk that the Fed will not cut interest rates until March 2025 at the earliest, but the bank's economists said they are sticking with their December forecast for the only rate cut this year. “We don’t think officials will feel comfortable starting a rate cut in June or even September,” BofA economist Stephen Juneau wrote in a note. “With inflation data beating expectations to start the year, it’s not surprising that the Fed would back down on any immediate rate cuts, especially given the strong activity data. Of course, there’s still hope that inflation data will ease further in the next few months and give the central bank some leeway,” he said. June and July still on track Citigroup still expects the Fed to start easing in June or July and cut rates multiple times this year. Citi economist Andrew Hollenhorst wrote that Powell and Fed officials “will be pleasantly surprised” by inflation data in the coming months, adding that the Fed “is prepared to cut rates on slower annual core inflation or any signs of weakness.” Goldman Sachs Chief Economist Jan Hatzius wrote that he postponed the month he expected policy easing, but not until July, "as the broader disinflation narrative remains intact."