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Traders wait a reduction in the Fed's base rate by 1 pp by the end of 2024


November, 20 2023
watermark Economic news

According to data published last week in the United States, inflation in the country has slowed down, which has led to speculation about a possible imminent and significant reduction in interest rates by the Fed.


Derivatives market participants now highly estimate the probability of a one percentage point reduction in the base rate by the end of next year. The current rate range is 5.25-5.5% per annum. It is assumed that the first decline may occur as early as May.


The report of the international rating agency Moody's states: «The markets are aware that the slowdown in inflation gives the Federal Reserve the opportunity to cut rates.» Jeremy Siegel of the Wharton School also believes that the Fed's struggle with high inflation is coming to an end, and rate cuts may begin as early as March.


According to the Financial Times, markets are currently effectively ruling out the possibility of further tightening of monetary policy, with many experts expecting the first rate cut in June not only in the US, but also in the UK and the eurozone.


The consumer price index (CPI) in the United States in October increased by 3.2% compared to the same month last year, which is less than 3.7% in September.


The Core CPI index, which excludes the cost of food and energy, rose by 4% – this is the minimum growth in the last two years after an increase of 4.1% in September.


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