But the turmoil has largely been contained to regional banks, and financial and economic leaders have maintained that the banking sector remains stable.Ī serious turn for the worse in the banking sector, an implosion in the labor market or a similar nosedive for the economy would have to occur for the central bank to lower rates in July, said Liz Ann Sonders, chief investment strategist at Charles Schwab. The collapses of Silicon Valley Bank, Signature Bank and First Republic Bank this year spurred fears that the banking sector could face more turmoil and credit standards will tighten. The Fed last slashed rates after an emergency meeting in March 2020, when the onset of the Covid-19 pandemic sent US markets tumbling into the first bear market in 11 years and incited panic that the global economy could tip into a deep recession. “The Fed rarely cuts rates without some sort of crisis in between,” said Kara Murphy, chief investment officer at Kestra Investment Management. In other words, there’s nothing - at least, not yet - to convince the Fed it should pivot to lowering rates. The US housing market is cooling, but low inventory and persistent demand are pushing home prices higher in some parts of the country. Meanwhile, American unemployment is at a historic low. The Personal Consumption Expenditures price index, the Fed’s preferred inflation gauge, rose 4.2% for the 12 months ended in March. A rate-hike pause could actually be better for stocks than a cut, they say.Įxperts say that the Fed won’t cut rates anytime soon for two key reasons: Inflation remains sticky, and the economy has stayed strong.Īlthough prices are stabilizing, inflation remains well above the Fed’s 2% target. The central bank also opened the door to a pause, accelerating bets that the Fed will hold rates steady at its next meeting in June and cut rates as soon as July.īut experts say that the Fed probably won’t slash rates so soon, at least if the economy stays hot (all bets are off if the US defaults on its debt). The Fed issued its tenth consecutive rate hike this May, raising rates by a quarter point. Still, investors have remained hyper-alert for signs that the central bank could let up its brisk clip of interest rate increases. The stock market has stayed resilient this year after a brutal 2022 that was roiled by persistent inflation, the Federal Reserve’s interest rate hikes, Covid shutdowns and geopolitical tensions. Although a pause in interest rate hikes appears likely, cuts may be farther off than some believe. Wall Street is eager to see the Federal Reserve wind down its aggressive rate-hiking cycle that’s battered markets and tested investor morale.
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