US Stocks: US Fed to cut rates in June, economists say, despite war inflation risks
Why it matters: A June cut would reshape bond yields and equity valuations while inflation risks linger.
- Federal Reserve is projected to hold the policy range at 3.50‑3.75% on March 18, with a June cut to 3.25‑3.50% seen by 63 of 96 economists.
- Kevin Warsh—Trump’s Fed chair pick—has been touted as a catalyst for faster cuts, but analysts say committee dynamics and data will dictate the pace.
- Oil price surge (+40% globally) has lifted two‑year Treasury yields by ~30 bps and pushed rate‑cut futures out to September, underscoring inflation pressure from the Iran conflict.
- Nomura’s Jeremy Schwartz notes the war‑induced energy spike could feed headline and core inflation, yet the labor market’s weak trend tempers a more aggressive stance.
- Rabobank’s Philip Marey argues the Fed will likely “sit on its hands” awaiting data, reflecting a broader consensus that holding rates longer is more probable than rapid cuts.
- PNC’s Gus Faucher warns inflation risk outweighs labor risk, with PCE expected at 2.8% in H1 2024 and 2.7% in 2026, keeping the Fed cautious.
Economists expect the Fed to keep rates steady in March but likely cut them in June, despite war‑driven oil price spikes keeping inflation risk high; political pressure from Trump’s Kevin Warsh nomination adds uncertainty, while the labor market stays resilient.
