The End of Elevated Rates Appears Near

Could today’s Fed meeting mark the end of high rates? Despite holding rates steady at the current 5.25% - 5.50% levels, the post-meeting conference commentary indicated coming rate cuts, possibly as soon at its next meeting in Sept ‘24.

The Fed’s remarks highlighted a continued strong economy, some labor market softening, steady unemployment and inflation readings headed in the right direciton. The June ‘24 CPI of 2.97% is at the lowest level in 3 years. With inflation settling, the Fed appears to be turning its attention towards the idea of a possible soft-landing, another big topic of the post-meeting conference. Seeing Powell fumble through his hard vs soft landing comments underscores the futility of such a prediction. Rates rose at an unprecendented rate to unprecedented levels on the wake of a global pandemic, balloning US debt levels, and 40-year high inflation. Such anomolous events and the side-effects they spur deserve the humility of anyone bold enough to predict future financial outcomes. Powell had to answer the question in regards to current rate strategy. Let’s hope he’s somewhat right.

The Fed’s juggling a lot at the moment - elections, inflation, economic growth and labor markets - so looking ahead, the path forward might see more rate cut head fakes like we’ve seen in the path. Continuing to expect more of the same for now, high rates that is, is probably the safest bet anyone can make at this time.