In December 2023, the Federal Reserve’s decision to not raise the Effective Federal Funds Rate and potential rate cuts in 2024 caused excitement in the markets. However, John Beuerlein, chief economist at Pohlad Companies, advises caution and states that there is no indication from the Fed’s meeting minutes that they plan to cut rates as much as expected by the market.
Beuerlein also discusses factors such as a “real” federal funds rate of 2.7%, balance sheet reduction efforts by the Fed since late 2022, and slowing economic indicators. While demand for jobs remains high despite a softening labor market, unemployment remains at 3.7%.
It is important to understand that interest rates have likely peaked but it is premature to expect significant rate cuts from the Fed at this time. The central bank will continue its efforts towards reducing liquidity added during pandemic shutdowns until they see sustained easing of inflationary pressures and a substantial slowdown in economic growth.
The article was originally published on Connect CRE website.
