After holding short-term rates held steady at 5% to 5.25% in June, the Federal Reserve expects to raise rates perhaps twice during its four remaining meetings of 2023, though the markets expect fewer hikes and material rate cuts in 2024.
The Fed’s concern is primarily stubbornly high services inflation, which remains well above the Fed’s 2% target and is bolstered by 6% wage growth. Interest-rate futures give a more dovish forecast, expecting a two-in-three chance of a July hike, but with rates broadly flat after that and then falling as 2024 progresses. Most people, including the Fed, see inflation ultimately easing as shelter costs moderate. But the Fed is not willing to contemplate meaningful rate cuts yet.
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