The Federal Reserve isn't sticking with the schedule of interest rate cuts it predicted earlier in the year. That makes navigating the market more challenging.
Fast forward to May’s Federal Open Market Committee meeting, however, and the hopes of a rate cut in the first half of 2024 are quickly diminishing. Indeed, it appears likely the Fed will hold rates where they are for much longer than anyone could have imagined back in January. Some market commentators even think we're stuck with “higher for longer” until 2025, despite the pressure of an imminent presidential election.
This has been fuelled by rampant spending, with consumers preferring to take on more debt rather than tighten their belts. In fact, the savings rate in the U.S. has continuously declined from 4.1% in January to just 3.2% in March, while household debt levels keep beating previous records. On top of this, unemployment has failed to edge higher. The jobless rate fell from 3.9% in February to 3.8% in March, hovering around historic lows.