Economists Still Expect June Fed Rate Cut
Despite rising energy prices, most economists polled by Reuters still expect the first Fed rate cut in June. However, "war inflation risks" could delay cuts if energy prices climb further. The Fed's preferred inflation gauge remained "stubbornly hot" in January.
The Reuters poll showed 58 of 86 economists still predict a June rate cut, despite the potential inflationary impact of geopolitical events. The consensus remains that the Fed will start easing monetary policy in the summer, but the window is narrowing. January's Personal Consumption Expenditures (PCE) index, the Fed's preferred inflation gauge, rose 0.4%, exceeding expectations and signaling persistent inflationary pressures. This followed a 0.5% increase in December, further fueling concerns about the "stubbornly hot" inflation. Oil prices have been climbing due to ongoing conflicts and supply chain disruptions, adding to the inflationary pressures. Some analysts believe that if Brent crude oil exceeds $100 a barrel, a June rate cut would be unlikely. Federal Reserve officials have remained cautious, emphasizing the need for more data to confirm that inflation is truly on a sustainable path toward the 2% target. Market expectations for a rate cut have fluctuated, reflecting the uncertainty surrounding the economic outlook and geopolitical risks.
