Both the Federal Reserve and the Bank of England (BoE) have made their latest pronouncements on interest rates. At the turn of the year, this week’s meeting was deemed to be the one at which the Fed would make the first of six rate cuts this year, but the chances of that happening have long since evaporated.
As was the case in early 2023, when investors thought rates would peak as the calendar turned, the new year has brought a reality check for those who got carried away with Christmas cheer over the holiday period. The first Fed cut is now expected in June or July, and market expectations are belatedly in line with the central bank’s own. At the time of writing, this amounted to three cuts in 2024.
There are two things to draw from this outcome. The first is whether the timing of that initial cut matters all that much to investors any more: the S&P 500’s end-of-year rally was, in part, attributed to rate-cut euphoria, but the index has risen another 9 per cent year-to-date even as those expectations have been reined back in.