TS Lombard chief U.S. economist Steven Blitz suggests that even if the Federal Reserve opts not to lower interest rates this year, it won't hinder the markets from continuing to rise.
Investor anticipation is high as they closely monitor U.S. economic data releases and clues from Fed officials regarding potential rate decreases in 2024.
Despite maintaining its benchmark overnight borrowing rate, the U.S. central bank is still expected to implement three quarter percentage point decreases by the end of the year, leading to a surge in market activity and new all-time highs in benchmark indices.
The Federal Reserve may decide not to lower interest rates this year, but it won't stop the markets from rising, says TS Lombard chief U.S. economist Steven Blitz.
The Federal Reserve may decide not to lower interest rates this year, but it won't stop the markets from rising, says TS Lombard chief U.S. economist Steven Blitz. (Photo : by Chip Somodevilla/Getty Images)
Investor Anticipation and Fed Rate Speculation
His remarks coincide with investors' anticipation of more U.S. economic data releases and their careful observation of Fed officials' hints on the anticipated volume of rate decreases in 2024.
Consistent with forecasts, the U.S. central bank maintained its benchmark overnight borrowing rate in the range of 5.25% to 5.5% last week, leaving interest rates steady for the fifth straight week. Additionally, the Fed stated at the time that it continued to anticipate three quarter-percentage point decreases by year's end.
Both domestically and internationally, the message spurred a market surge that saw benchmark indices reach new all-time highs.
When asked on Thursday if there will be a Fed interest rate decrease this year or not, Blitz said, "It's getting pretty good." As you are aware, 0.4% month over month is a high figure that they are monitoring. They are considering more than simply the previous year.
According to the CME FedWatch Tool, traders are presently pricing in a roughly 55% likelihood of a first Fed rate drop in June. It's less than the roughly 70% it was last week.
Market Outlook Amidst Fed's Interest Rate Decision
The markets will probably keep rising even if the Fed decides not to lower interest rates this year, which is what U.S. asset management Vanguard has identified as its base-case scenario.
In order to return policy to normalcy, US central bank policymaker Christopher Waller stated on Wednesday that there was "no rush" to lower the policy rate.
"Tells me that it is prudent to hold this rate at its current restrictive stance perhaps for longer than previously thought to help keep inflation on a sustainable trajectory toward 2 percent," Waller said, citing recent inflation figures, while speaking at an Economic Club of New York event.
In a related development, Atlanta Federal Reserve bank President Raphael Bostic announced last week that, contrary to his earlier projections of two rate cuts this year, he now only anticipates one quarter-point reduction.
In light of the impending presidential election in November, Blitz cautioned that while the Fed is ready to lower rates in the event that the largest economy in the world collapses after June, the optics of such a move might become "very difficult" in the second half of the year.
