Due to market concerns about the possibility of the Federal Reserve delaying rate cuts and reducing the number of rate cuts, all four major US stock indices fell on Tuesday, and Bitcoin also fell below the $65,000 mark. Loretta Mester, the President of the Federal Reserve Bank of Cleveland, stated on Tuesday that she still expects the Federal Reserve to cut interest rates this year and may cut rates three times, but she does not believe that a rate cut in May is possible.
Recent inflation data in the United States has not shown a significant cooling, causing the market to lower its bets on the number of rate cuts by the Federal Reserve this year. Some economists and professional investors believe that even if the Federal Reserve cuts rates before the end of this year, the number of rate cuts may be lower than the expected three times by Federal Reserve officials and the market, with a maximum of one rate cut or even no rate cut.
Federal Reserve officials are not in a hurry to cut rates. Loretta Mester, a voting member of the Federal Open Market Committee (FOMC) and the President of the Federal Reserve Bank of Cleveland, who will retire in June this year, stated on Tuesday that she hopes to see more evidence of inflation cooling before cutting rates. However, she pointed out that recent data generally aligns with her expectations of a slowdown in price growth.
In Loretta Mester’s view, the higher-than-expected inflation data since the beginning of this year largely proves that the road to fighting inflation will not be smooth all the way. She still believes that inflation will continue to move towards the Federal Reserve’s 2% target, but the decline will be slower than last year. Loretta Mester mentioned that she expects the possibility of three rate cuts this year, but it is still difficult to say whether it is necessary to reduce the number of rate cuts. She believes that there is not enough evidence to support a rate cut at the interest rate decision meeting on April 30th to May 1st, but she does not rule out the possibility of a rate cut in June.
Loretta Mester stated that she estimates that the inflation rate in the United States this year will be higher than the median expectation of Federal Reserve officials. She reiterated that rate cuts will begin later this year, but raised the expected federal funds rate from 2.5% to 3%.
Mary Daly, the President of the Federal Reserve Bank of San Francisco, stated on Tuesday that she still believes that the expectation of three rate cuts in 2024 is reasonable, but considering the strong economy, there is currently no urgency for rate cuts.
As a result of market concerns about the prospect of rate cuts, all four major US stock indices fell on the 2nd:
– The Dow Jones Industrial Average fell 396.61 points or 1%, closing at 39,170.24 points.
– The Nasdaq Composite Index fell 156.38 points or 0.95%, closing at 16,240.45 points.
– The S&P 500 Index fell 37.96 points or 0.72%, closing at 5,205.81 points.
– The Philadelphia Semiconductor Index fell 75.16 points or 1.51%, closing at 4,886.94 points.
Bitcoin was also affected by the uncertain prospect of rate cuts, dropping 7% in a single day. It reached its lowest point at $64,493 at 8 a.m. and slightly recovered to $65,851 before the deadline, with a 24-hour decline of 1.05%.