Barclays analysts are reportedly expecting the Federal Reserve to commit to reversing its hawkish monetary policy early this year.
The analysts predict that Personal Consumption Expenditures (PCE) will print an average of 1.9% on a seasonally adjusted annual rate for the last six months of 2023, Investing.com reports.
The PCE is an inflation indicator that measures the prices that people living in the US pay for goods and services. The Federal Reserve reportedly prefers to track the PCE over other inflation indicators.
With the PCE dropping within the Fed’s goal of 2% inflation, the bank is expecting the Federal Open Market Committee (FOMC) to go into a more accommodative monetary campaign beginning in March, reducing rates by 25 basis points at every other meeting.
The analysts believe that the Fed funds rate will drop to 4.25% to 4.50% by the end of the year and about 3.25 to 3.50% by the conclusion of 2025. Currently, the Fed funds rate stands at 5.25% to 5.50%.
Say the analysts,
“We view our rate cut projection largely as a recalibration of the nominal policy rate in light of the lower inflation, and it is predicated on a continued moderation in inflation measures…
Our rate cut projection also does not reflect political considerations surrounding the upcoming elections. Instead, we think the FOMC will base its rate decisions on economic considerations and primarily on the inflation outlook.”
Barclay’s rate cut forecast has been bumped up to March from June.
Veteran investor Jan van Eck, CEO of investing giant VanEck, recently said that falling interest rates would be one of the key drivers behind coming gains for Bitcoin (
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Author: Alex Richardson
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