US Federal Reserve to hold first 2024 meeting

The US Federal Reserve (Fed) is scheduled to hold its first meeting of 2024 today.

Given the rapid decline in inflation, the Fed has been widely expected to cut interest rates, which are currently at 5.5%—the highest level in 22 years. However, most economists do not expect a rate cut just yet. The strong performance of the US economy, which grew by 2.5% in 2023, makes a decrease in interest rates less urgent.

2023 US GDP growth outperformed overall growth in the Western hemisphere. The European Union grew by only 0.7%, while its largest economy, Germany, contracted by 0.3%. In addition, both inflation and unemployment rates remain low in the US, at 3.4% and 3.7%, respectively. Driven by strong consumer demand, the US economy will likely continue to outperform Europe in 2024.

At this point, a rate cut is seen most likely at the end of Q2, possibly during the Fed’s June meeting. The US inflation rate will likely decrease to just above the Fed’s target of 2% by then. Any earlier rate cuts are likely to be very minor, as economic performance remains solid in the US, while the EU will hope to avoid a recession this year. China’s economic performance also remains in doubt, as foreign investments have turned negative for the first time since records began in 1998.