This comes as a growing number of market participants have raised the possibility of no rate cuts at all this year, including Minneapolis Fed President Neel Kashkari, who said last week that no cuts are a likely scenario if inflation continues to move poorly. side.
Jorge Lagarias, chief economist at Mazars, told CNBC on Monday that summer interest rate cuts now look much less likely.
“Personally, I wouldn't be surprised if we see fewer interest rate cuts and pay more towards the end of the year,” he told Squawk Box Europe on Monday.
“This is a strong economy. Make no mistake, it is supported by debt and to some extent overburdened credit cards, but it is a strong economy. So the Fed will struggle to find a justification for cutting interest rates soon.”
Market prices reflect ongoing uncertainty, with interest rate cuts now likely to be less than 50% for both June and July, according to CME's FedWatch tool – Much lower than at the beginning of the month.
“The Fed has been kicking itself since 2021 when it ostensibly got the 'interim team' wrong… What they feel is that they can't get it wrong again, which means they are more likely to err on the Fed's side. Cautious,” Lagarias added. “.
Despite this, he said it was still “very likely” there would be rate cuts this year.
“They have some room to cut, but they don't want to get it wrong. They don't want to be the Fed that cuts interest rates as inflation continues to beat expectations. So they want to see more data in the right direction and they are doing that.” “They are willing to wait,” Lagarias added.
Speculation is growing that there may be no interest rate cuts this year, although economists remain divided.
Torsten Slok, chief economist at Apollo Global Management, said last month that he did not expect any cuts because the US economy “simply is not slowing down” and US asset manager Vanguard does not have interest rate cuts as a base case for this year. .
While former Federal Reserve Vice Chairman Roger Ferguson told CNBC last week that he sees a 10-15% chance of no cuts this year.
Other analysts and economists still support the Federal Reserve's indication in March that it expects cuts of three-quarters of a percentage point this year.
Based on current growth and inflation forecasts, Jan Hatzius, chief economist at Goldman Sachs, told CNBC on Friday that he “expects some interest rate cuts based on what Chairman Powell and other Fed officials have said.”
“The timing of that will of course depend on near-term data, and on the reaction from the Fed, but based on our expectations, I would be very surprised if we don't get rate cuts this year. Big surprise.”
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