To The Moon

The Federal Reserve interest rate is a critical economic indicator that has significant implications for the US economy and the global financial markets. The Fed interest rate is the rate at which banks can borrow money from the central bank, and changes in this rate can impact the cost of borrowing for consumers and businesses.

As market expect, Fed has kept interest rates steady at the 13 Dec meeting, they have also state that it will not likely to raise rates any further in this cycle. But Fed Chair did indicate that Fed is prepared to start back the tightening further if they see the need.

Since Fed begin its tightening campaign in early 2022, a total of 525 basis points of hikes have been implemented and this has reduced Fed security holdings by over $1 trillion. The economy has felt the weight of the impact of these Fed actions, but according to Fed Chair, the impact and effect has not been fully displayed or in play. So this would mean it is difficult to determine how long more would the long restrictive policy be needed and most importantly, when cuts should begin.

In the meantime, the Summary of Economic Projections (SEP) has shown that the median FOMC member anticipates 75 basis points of interest rate cuts in 2024, 25 basis points more than at the September meeting. This potentially reflect a change of slight downward revision to the Fed’s inflation projections. I would project four rate cuts in 2024 starting around mid-year.

Note: I will share more on what is Summary of Economic Projections (SEP) in another article.

In this article, I would like to share what my model has predicted for the Fed Funds for 2024.

Fed Funds Rate Prediction For 2024 (January to December)

Fed Funds Rate Prediction Likely Rate Cuts Months

We should continue to see no change in the Fed Funds rate in January 2024, it should start with 5.50%, there might be possibility of interest rate changes and received a new value within the range of 5.25% to 5.75%, but the model predict that we will most likely see the rate will be 5.50%, no change.

Similar situation might be observed for February 2024, possibility of new value within the range of 5.25% to 5.75%, but it will most likely ended with the rate at 5.50%, no change. March 2024 is no difference, thought we might see the interest rate changed within the range of 5.25% to 5.75%, but most likely it should stay at 5.50%, no change.

Both April and May 2024, we should see Fed holding the interest rate unchanged at 5.50%, though we might see interest rate attempting to change within the range of 5.25% to 5.75%.

The model is actually looking to see Fed cutting the interest rate by 25 basis point to 5.25% in June 2024, we will see that the month would receive a new range of 5.00% to 5.50%, but the rate will most likely end at 5.25%, with a -0.25 change.

Something we might need to be aware would be July 2024, as the model actually predict that the interest rate would remain at 5.25% after the first cut in June 2024, this would deserve some attention from us, as it could mean that U.S. economy might be showing signs of inflation coming back.

Things should look better in August 2024, as we could be seeing the rate at 5.00% though possibility of a range of 4.75% to 5.25% is there, this would mean a change of -0.25 points. Rate would remain at 5.00% in September 2024 as there is most likely no significant economic data to suggest that further cut is possible.

As we entered October 2024, we could be seeing the possibility of a new range of 4.50% to 5.00%, and the model actually predict that there will be a change of -0.25 points, before the rate settled for 4.75%. This could mean that the economy is clearly out of recession and Fed should have confidence of more cuts moving forward.

We are seeing more cuts in November 2024, though the month might seeing possibility of toying with range of 4.25% to 4.75%, it eventually settled for a change of -0.25 points to get the rate at 4.50%.

Finally we could see that Fed is done with either the rate hikes or cuts for 2024, before we close the year with 4.50% with no change even though there is some possibility presented during the December 2024 with range of 4.25% to 4.75%.

Summary

The Fed also uses interest rates as a tool to influence economic growth, employment, and inflation. Higher interest rates can slow down economic growth and curb inflation, while lower interest rates can stimulate borrowing and investment to boost economic activity.

Changes in the Fed interest rate can also affect the value of the US dollar and have ripple effects on financial markets worldwide, making it an essential indicator to monitor for investors and policymakers.

I hope that with this prediction, we would be able to gauge where the market might be heading, and the most likely first rate cuts should happen in second half of 2024, and we could see 4 cuts in 2024 as predicted.

Appreciate if you could share your thoughts in the comment section whether you think Fed Funds rate cuts would begin in June 2024, and we could see 4 cuts before we close 2024 with more optimistic outlook.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.