The possibility of the Federal Reserve (FED) cutting interest rates has been a topic of discussion among analysts. David Hay, Chief Investment Officer at Evergreen Gavekal, expressed his doubts about rate cuts, stating that he is uncertain if there will be any cuts at all.
Louis-Vincent Gave, the company’s chief economist, highlighted various factors that could potentially lead to the FED cutting rates. These factors include inflation exceeding expectations, increases in fuel prices, record-high gold prices, cryptocurrencies, and speculative activity in certain parts of the stock market. Gave also mentioned that the FED’s decision could be influenced by the rise in bond yields and the depreciation of the dollar.
Marko Kolanovic, head of JP Morgan’s global market strategy team, emphasized the issue of controlling inflation in the face of booming stock and cryptocurrency markets. He pointed out that historically loose monetary conditions have resulted in significant increases in consumer price index values, suggesting that higher interest rates might be necessary.
Some analysts, including Hay and Gave, believe that the FED may choose to cut rates in June before the political conventions and the presidential campaign intensify. However, looking at the historical data on interest rate changes during presidential election years since 1994, the FED has typically kept rates steady for the majority of the time (71.2%) and raised them in a smaller proportion (15.3%). The periods when interest rates were reduced (13.6%) occurred during significant events like the 2008 financial crisis and the pandemic in 2020.
It is important to note that this information should not be considered as investment advice.