Fed’s Powell walking tightrope on rate cuts as inflation bites

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Laffer Associates founder and Chairman Art Laffer reacts to potentially replacing Jerome Powell as Fed Chair and discusses whether the Fed will cut interest rates in 2024 on 'Making Money.' #foxbusiness #makingmoney

Very few expect the  Federal Reserve to cut interest rates Wednesday. Instead, investors will parse Chairman Jerome Powell’s Fed speak to determine if they’ve got expectations right for the first rate cut, or, if years of stubborn inflation will push potential cuts out even further. 

«Our current expectation is for three rate cuts before year-end, with the first rate cut at the conclusion of the Federal Open Market Committee meeting on June 12, 2024,» Brian Reiling, head of fixed income strategy at Wells Fargo Investment Institute wrote in a note to clients. "Inflation data would need to meaningful disappoint to change the timing of the Fed’s first rate cut" he added. 

Reiling, like other market participants tracked by the CME’s FedWatch Tool, had expected as many as six rate cuts at the start of the year, bringing the Federal funds rate to 4.6% by year's end. This projection is expected to be updated Wednesday. 

FED SEES MORE RATE CUTS IN 2024

Inflation has not subsided as quickly as policymakers had expected. In February, consumer prices on an annual basis rose 3.2% above economists' projections, with prices for items like rent, beef and juice even higher at 5.8%, 9.2% and 27%, respectively. A separate report on producer prices rose 1.6% annually, also more than expected last month. 

While consumer inflation is down from its peak of 9.1%, it remains above the Fed's 2% mandate. 

Lean ground beef for sale on the opening day of the new Walmart Neighborhood Market in Panorama City, Calif. (Robyn