The Federal Reserve cut interest rates by 50 basis points today, signaling the start of anticipated rate reductions in 2024. This shift in monetary policy is driven by cooling inflation and a slowdown in economic growth. As a result, mortgage rates are projected to decline, with expectations that they could fall below 6% by the end of the year.
Federal Reserve Chair Jerome Powell emphasized in today’s press conference, “We are committed to adjusting our policies as necessary to sustain economic growth while keeping inflation in check.”
Here’s a look at what Polymarket forecasters say about the path of interest rates for the rest of the year.
How Many Rate Cuts in Q4?
Polymarket odds provide insights into the likelihood of various rate cuts for the remainder of the year. These odds are influenced by market sentiment and expectations, which are shaped by current economic data and trends. Current market forecasts by Polymarket suggest a range of potential rate cuts.
- 8% likelihood of a 75 basis point (bps) cut
- 40% probability of a 100 bps cut
- 38% probability for a 125 bps reduction
- 14% chance for cuts exceeding 150 bps
Key factors influencing the anticipated number of rate cuts include inflation trends, especially if inflation approaches the Fed’s 2% target. Additionally, the pace of GDP growth and labor market conditions play a crucial role. Global economic conditions, such as international trade dynamics and financial market stability, are also significant considerations.
Inflation Cooling?
Inflation in the United States has shown signs of cooling in 2024, reducing the pressure on the Federal Reserve to maintain high interest rates.
- The Consumer Price Index (CPI) decreased from 9.1% in June 2022 to 3.1% in January 2024.
- Decline attributed to stabilizing energy prices.
- Improved supply chain conditions.
- Moderation in food and housing costs.
- Tighter monetary policy by the Federal Reserve.
- Polymarket odds indicate a 59% chance inflation will be above 2.2% in September.
- As inflation nears the Fed’s 2% target, interest rate cuts become more likely.
- Policymakers remain cautious, monitoring core inflation and labor market conditions for sustainable price stability.
As inflation approaches the Fed’s 2% target, the likelihood of interest rate cuts increases. However, policymakers remain cautious, closely monitoring core inflation metrics and labor market conditions to ensure sustainable price stability before implementing significant monetary policy changes.
Is the ECB Next?
The European Central Bank (ECB) is expected to follow a similar path to the Federal Reserve in 2024, with interest rate cuts anticipated. However, the timing and pace of these cuts may vary.
- The ECB is expected to follow the Federal Reserve’s path in 2024.
- Interest rate cuts are anticipated.
- Timing and pace of cuts may vary.
- Polymarket odds indicate a 33% chance of a rate cut in October.
- By June 2025, analysts predict the main refinancing rate will stabilize between 3.0% and 3.75%.
- The ECB’s strategy for rate cuts is data-driven.
- Strategy relies on inflation outlook, economic data, and policy transmission effectiveness.
- ECB leans towards monetary easing but remains vigilant about inflation.
- Inflation is projected to remain above target into 2025.
Source: Perplexity
