facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog search brokercheck brokercheck Play Pause
The Waiting Game Continues - Fed Pencils in One Rate Cut by Year End [VIDEO] Thumbnail

The Waiting Game Continues - Fed Pencils in One Rate Cut by Year End [VIDEO]

At its June 12 policy meeting, the Federal Reserve left short term interest rate unchanged, and penciled in one rate cut in 2024.  In terms of interest rates cuts, the waiting game continues...

The Federal Reserve last raised short-term interest rates 11 months ago, and has kept them unchanged ever since. Prior to the current pause, the central bank raised rates by a total of +5.25% over a 17-month period. That was the fastest and most aggressive rate-hiking campaign in decades.  Now the focus has shifted to the timing of anticipated interest rate cuts.

The Fed's monetary policy decisions generally hinge on inflation and employment data. The central bank has two main objectives: (1) price stability and (2) full employment. Price stability means low and stable inflation. Full employment means economic conditions that create jobs and keep unemployment low. One of the tools the Federal Reserve uses to support these goals is adjusting short-term interest rates. Rate hikes are often used to combat inflation, while rate cuts are used to stimulate the economy.

During the 17-month tightening cycle, the Federal Reserve focused on combating high inflation rates. As inflation eased, the central bank’s attention shifted toward its full employment goal. Higher interest rates were expected to lead to higher unemployment, and thus eventual interest rate cuts. To the contrary, the unemployment rate has remained relatively low and currently stands at 4% (May 2024).  Inflation, on the other hand, has proven to be stickier then the Fed would like.  While the inflation rate has fallen from 9.1% to 3.3% over the last two years, the Fed would like to see if fall further.  The combination of low unemployment and above target inflation has kept interest rates higher for longer.

Figure 1 graphs the time between the final rate hike and the first rate cut of previous tightening cycles:

Chart - Number of months Short-Term Rates Were Unchanged Following Tightening Cycles

These ‘pause periods’ ranged from 4 months in 1989 to 15 months in 2006, and 18 months in 1997. Compared to prior cycles, the current 11-month pause is longer than average, but not wildly so.

While higher rates for longer persists, the economy and equity markets continue to exhibit strength and resilience.

Schedule a Call


All content is for informational purposes only.  It is not intended to provide any tax or legal advice or provide the basis for any financial decisions.  Nor is it intended to be a projection of current or future performance or indication of future results. Purchases are subject to suitability.  This requires a review of an investor’s objectives, risk tolerance, and time horizons. Investing always involves risk and possible loss of capital.  Opinions expressed herein are solely those of Darrell Capital Management, LLC.  The information has been derived from sources believed to be reliable but is not guaranteed as to the accuracy and completeness and does not purport to be a complete analysis of the materials discussed.  All information and ideas should be discussed in detail with your financial, tax and legal advisors prior to implementation. The information contained herein should be in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services to any residents of any state other than the State of California or where otherwise legally permitted. Advisory services are offered by Darrell Capital Management, LLC, an Investment Advisor in the State of California. Being registered as an investment advisor does not imply a certain level of skill or training. Social post reactions and comments should not be viewed as endorsements or testimonials.