Fed Rate Cuts Unlikely Amid Unexpected Inflation Spike and Job Market Concerns, Says Economist

In the first quarter of 2023, the United States GDP (gross domestic profit) grew by only 1.6%, marking the smallest increase in over two years. Despite this, experts on Wall Street are debating the possibility of rate cuts by the Federal Reserve. Some are unsure if cuts will even happen in 2024, while others suggest that rates could potentially increase.

To gain a better understanding of the economy and the potential for rate cuts, Jason Furman, a Professor at Harvard University’s Kennedy School of Government, recently spoke with Yahoo Finance. Furman pointed out that core PCE inflation, which is closely monitored by the Fed, rose to a 3.7% annual rate in the first quarter, far exceeding previous expectations of 2.1%. This unexpected jump has raised concerns about inflation, making it unlikely that the Fed will enact rate cuts anytime soon unless there is a significant decline in the job market.

Furman emphasized that a drastic deterioration in the job market would be the only scenario in which the Fed might consider cutting rates before the end of the year. To stay informed on expert analysis and the latest market trends, watch Furman’s full episode on Yahoo Finance for more insights.