Fed Urged to Cut Rates Five Times in 2024



Key Takeaways

  • Paul Gambles advocates for at least five Fed rate cuts in 2024 to prevent a recession.
  • Jerome Powell maintains a cautious approach, focusing on achieving a 2% inflation target.

Calls for Multiple Rate Cuts in 2024

Paul Gambles, co-founder and managing partner at MBMG Group, expressed concern over the Federal Reserve’s current monetary policy. Speaking on CNBC’s “Squawk Box Asia,” Gambles emphasized the need for the Federal Reserve to implement at least five rate cuts in 2024. He warned that the Fed’s policy is increasingly detached from economic realities, risking significant economic damage.

The Fed’s Current Stance

The U.S. policy rate currently stands at a 22-year high of 5.25%-5.50%. Market traders are anticipating a rate cut as early as March 2024, per the CME FedWatch Tool. However, Federal Reserve Chairman Jerome Powell, in recent statements, indicated that it’s premature to consider easing policies. He stressed the importance of maintaining a restrictive stance until inflation consistently aligns with the Fed’s 2% target.

Market Reactions to Powell’s Comments

Despite Powell’s remarks, financial markets interpreted his tone as dovish. This perception led to a boost in Wall Street’s main indexes and a significant drop in Treasury yields, signaling a belief that the central bank might cease raising rates.

Inflation Trends and Predictions

The U.S. Consumer Price Index remained unchanged in October, sparking hopes that inflation could be on a downward trajectory. David Roche, a veteran investor, shared with CNBC his belief that the Fed might have concluded its rate-hiking cycle. Roche predicts a more embedded inflation rate of around 3%, higher than the pre-pandemic standard of 2%.

Looking Ahead to the Fed’s Next Moves

The investment community now awaits the Federal Reserve’s next meeting on December 13. The consensus among market players leans towards the Fed maintaining the current rate, reflecting a cautious approach in the face of fluctuating economic indicators.