The current interest rates in the United States are at their highest level in 22 years (5.25%~5.50%). In response to this, Paul Gambles, co-founder of investment advisory company MBMG, publicly stated that the Fed will need to cut interest rates five times in 2024 to avoid an economic recession.
Although the Federal Reserve has recently decided to pause interest rate hikes for the past two months, the rates currently range between 5.25% and 5.50%, which is still the highest level in 22 years. Paul Gambles, co-founder of the investment advisory firm MBMG, recently warned in an interview with CNBC’s “Squawk Box Asia”:
He further added that in order to prevent further deterioration of monetary tightening, the Fed will need to cut interest rates five times by 2024 to respond to the real-world economic situation and avoid an economic recession. This viewpoint has sparked widespread discussion in the financial industry and market attention.
Fed Chairman Powell: It’s too early to expect rate cuts
Although the market expects the Federal Reserve to start cutting interest rates in 2024, Fed Chairman Jerome Powell dampened investors’ optimistic expectations of significant rate cuts next year in his speech earlier this month, stating that it is too early to declare victory over inflation.
However, experts believe that Powell simply does not want the market to be too optimistic, and it is true that the interest rate cycle has already bottomed out. Jeffrey Roach, Chief Economist at LPL Financial, pointed out that Powell’s comments are gradually leaning towards the dovish camp.
David Roche, President of Independent Strategy, who accurately predicted the 1997 Asian financial crisis and the 2008 global financial crisis, also pointed out that unless the United States is hit by significant external factors such as energy or food, it is “almost certain” that the Fed has completed the interest rate hike cycle and the next step will be rate cuts.
Roche also stated that the inflation rate in the United States will remain at 3%, which is already reflected in the prices of various assets. He believes that the inflation rate is unlikely to fall back to 2%, so central banks around the world no longer need to aggressively combat inflation as they did in the past. Therefore, the embedded rate of inflation will be higher than 2%, reaching 3%.
Next week, the market predicts a 97.7% probability of no rate hike
On the morning of December 14th (Wednesday) Taiwan time, the Federal Reserve will announce whether or not there will be a rate hike after its interest rate decision meeting. Currently, according to the FedWatch tool, the market expects a 97.7% probability of the Federal Reserve maintaining the benchmark interest rate unchanged for the third consecutive time.
As the world’s largest economy, the monetary policy of the Fed will have a significant impact on the global economic situation. Investors should closely monitor relevant news in order to adjust their investment strategies in a timely manner.