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Markets are pricing in interest-rate cuts in Europe, the U.S. and other developed economies, but persistent inflation could dash those views, T.Rowe Price says. Inflation may not cool enough to let central banks ease next year, portfolio manager Ken Orchard says in a note. Economic growth paths have converged somewhat, but are likely to split again in 2025, spurring monetary policy divergence. While the ECB's been more willing to risk rate cuts despite high inflation and the BOJ is expected to keep tightening, the Fed may only be able to cut once or twice this year, he says. "The biggest economic concern would be that growth accelerates too quickly and central banks are forced to respond," he adds. Investors may need to seriously think about the prospect of rate hikes. (Rthvika Suvarna, [email protected])
A Federal Reserve interest-rate cut in September appears increasingly likely, with deceleration in U.S. inflation continuing and cracks beginning to emerge in the labor market, Michael Brown, senior research strategist at Pepperstone, says in a note. "The case for the FOMC to deliver a rate cut, sooner rather than later, continues to grow," he says. Preconditions for this include increased confidence in slowing inflation, a weakening labor market and a continued rise in the real fed funds rate, he says. Prospects of a September rate cut should support risk sentiment more broadly, he says. Markets are currently pricing in a rate reduction of 19 basis points for September, according to Refinitiv data. (Emese Bartha, [email protected])
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