The US Fed has planned only one rate cut this year and four cuts in 2025 :: InvestMacro

By JustMarkets

At Wednesday’s close, the Dow Jones Index (US30) decreased by 0.09%, while the S&P 500 Index (US500) added 0.85%. The NASDAQ Technology Index (US100) closed positive 1.53%. Meanwhile, the S&P 500 (US500) and NASDAQ (US100) indices made new highs.

As expected, the FOMC kept the target range for the federal funds rate unchanged at 5.25%–5.50% and said it would not cut rates until there is more confidence that inflation is moving steadily toward 2%. The FOMC maintained its 2024 US GDP estimate at 2.4%, unchanged from March, but raised its 2024 core PCE prognosis to 2.8% from 2.6% in March. Meanwhile, the dot plot shows that policymakers see only one rate cut this year and four cuts in 2025. Fed Chairman Powell said that inflation has come down significantly but is still too high, and the Fed maintains its restrictive stance to reduce demand relative to supply. He added that the CPI report is “progress” but not enough to justify policy easing. Markets rate the odds of a 25 bps rate cut at 8% at the July 30–31 FOMC meeting and 60% at the next meeting on September 17–18.

Oracle (ORCL) climbed a record 13%, leading the S&P 500 stocks higher after announcing a cloud infrastructure partnership with Google Cloud, Microsoft, and OpenAI. Apple (AAPL) closed up over 2% after unveiling new artificial intelligence features, including operating system updates and a new artificial intelligence platform called Apple Intelligence.

Equity markets in Europe were mostly up on Wednesday. Germany’s DAX (DE40) rose by 1.42%, France’s CAC 40 (FR40) closed up 0.97%, Spain’s IBEX 35 (ES35) added 0.63%, and the UK’s FTSE 100 (UK100) closed positive 0.83%.

ECB executive board representative Schnabel said yesterday that the Eurozone economy is gradually recovering, but the “last mile” of disinflation is proving to be bumpy. His counterpart, ECB governing council spokesman Patsalides, said the ECB’s future actions on interest rates would depend on data, and there is no specific direction the Central Bank is sticking to.

President Macron has denied rumors of resigning if his party performs poorly in the upcoming legislative elections. Macron’s call for snap elections came in response to the far-right’s victory in the European Parliament elections, which has raised investor concerns about France’s economic and financial future.

WTI crude oil prices fell to $78 a barrel on Thursday, retreating from two-week highs, as EIA data showed US crude inventories rose by 3.73 million barrels last week, the highest in six weeks, and defeated market expectations of a 1.55 million barrel decline.

Asian markets were predominantly down yesterday. Japan’s Nikkei 225 (JP225) was down 0.66%, China’s FTSE China A50 (CHA50) lost 0.07%, Hong Kong’s Hang Seng (HK50) was down 1.31% and Australia’s ASX 200 (AU200) was negative 0.51%.

Hong Kong’s stock market rose by 0.50% in morning trading on Thursday after falling more than 1% in the previous session, mainly due to gains in consumer and technology stocks. Electric carmakers rose amid signs that the EU’s tentative decision to raise tariffs on Chinese cars matched market expectations.

In Australia, the unemployment rate fell to 4% in May from a three-month high of 4.1% in April, matching expectations. The Reserve Bank of Australia (RBA) will keep the money rate at 4.35% at next week’s meeting but will likely reiterate that it will not rule out a further rate hike if inflation picks up. Last week, RBA Governor Michele Bullock said she would not hesitate if inflation picks up but noted that the risks to rates and inflation are currently balanced.

S&P 500 (US500) 5,421.03 +45.71 (+0.85%)

Dow Jones (US30) 38,712.21 −35.21 (−0.09%)

DAX (DE40) 18,630.86 +260.92 (+1.42%)

FTSE 100 (UK100) 8,215.48 +67.67 (+0.83%)

USD Index 104.70 −0.53 (−0.56%)

Important events today:

• – Australia Unemployment Rate (m/m) at 04:30 (GMT+3);
• – Eurozone Industrial Production (m/m) at 09:00 (GMT+3);
• – Switzerland Producer Price Index (m/m) at 09:30 (GMT+3);
• – US Initial Jobless Claims (w/w) at 15:30 (GMT+3);
• – US Producer Price Index (m/m) at 15:30 (GMT+3);
• – US Natural Gas Storage (w/w) at 17:30 (GMT+3);
• – US FOMC Williams Speaks at 19:00 (GMT+3).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.