The Federal Reserve Board meets this week for the first time in 2024, with optimism that interest rates will finally start coming down this year following an aggressive series of rate hikes since 2022. But investors itchy for those rate cuts will likely have to wait a bit longer. "Right now, (the markets) are pricing in a zero percent chance of a rate hike at the next meeting on Wednesday, but 50-50 odds of a rate cut starting in March," says KTRH Money Man Pat Shinn with Heritage Asset Advisors.
The Fed has been holding rates steady at recent meetings, while economic data (unemployment, GDP growth) has improved and inflation has eased from its historic highs. Still, Shinn sees a continued cautious tone and approach from the Fed moving forward. "Expect Fed Chair (Jerome) Powell to say yes, we're making progress on inflation, but no, it's too soon to declare victory," he says. "He does not want to make the mistake that happened back in the early 80s, when the Federal Reserve declared victory over inflation, only for it to come back, and come back big time."
Shinn tells KTRH predicting the Fed is not as difficult or complicated as many so-called money experts make it out to be. He simply watches the Fed Future Funds, which tells you what the markets are pricing in for the future. And he notes, the markets are usually right. "Throughout this entire rate hike cycle, it's important to know that the markets have been leading the Federal Reserve, and not the other way around," he said.
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