- Looking at the latest US inflation data and the recent speeches of Federal Reserve Chairman Jerome Powell, there remains an air of uncertainty about whether or not the anticipated interest rate cut in June would take place.
- Nevertheless, the analysts at State Street Global Advisors are bullish toward that prospect.
The Fed on the Prospect of Interest Rate Cut
On April 4, Fed Chair Jerome Powell continued to indicate a wait-and-see approach on the matter of interest rate adjustments from the current 5.25%-5.50% figures. The US central bank head emphasized these could only be greenlit once there’s confidence that inflation is already moving sustainably toward their 2% target, which serves as their basis for a soft landing.
It should be noted, however, that the February data published last month still showed a rising inflation at 3.2% compared to the 3.1% turnaround in the January report. Despite the numbers moving away from the Fed’s 2% goal, Powell reaffirmed his optimism that an interest rate cut could happen this year.
State Street Global Advisors is Bullish for Rate Cut in June
Notwithstanding the cautious and indecisive stance of Powell, State Street Global Advisors believes the Fed may only be downplaying the strong possibility of an interest rate cut in June. According to Bloomberg, the $3.6 trillion asset management firm projected a 50 basis points slash in interest rates by June to provide a little breathing room for businesses.
What’s more, the world’s fourth largest asset manager explained it could carry over to a total of a 150 basis-point decrease by year-end. The analysts of the firm anchored their prediction on the pivotal events in US politics this year amid the stronger March employment data posted by the US Bureau of Labor Statistics.
For context, the BLS news release on April 5 exhibited an increase of 303,000 in the total nonfarm payroll employment, slightly tugging down the unemployment rate at 3.8% for March from February’s 3.9%. This further downplays the need for rate cuts in the next Fed meeting.
State Street said the upcoming US Presidential Election may push the hand of the Fed to trim the interest rates. The company’s chief investment officer, Lori Heinel, suggested significant cuts may occur as the polling day comes closer and in the immediate aftermath of the election.
The asset management firm warned that the ensuing interest rate cuts do not mean a stronger economy for the US though. For them, the state of the US economy is still fragile, which is displayed by a lot of people defaulting on their credit card payments as well as the foreseen tanking cost of credit to small businesses.