Fed Rate Cuts Likely to Resume Sooner Than Expected
While the Federal Reserve may hold rates steady in January, ANZ’s G3 economist Brian Martin argues this pause is likely temporary. He dismisses the idea of a prolonged halt to rate cuts, citing weakening inflation and slowing economic momentum.
Rate Cuts Expected in March and June
Martin forecasts a 25-basis-point cut in March, followed by another in June, bringing the federal funds rate to a 3%-3.25% range by mid-2024. This trajectory reflects growing confidence that inflation is on a sustainable downward path.
- Core PCE inflation shows consistent cooling
- Labor market is softening without a sharp rise in unemployment
- Consumer spending and business investment are moderating
These trends reduce pressure on the Fed to maintain restrictive policy. The central bank is expected to remain data-dependent, but the overall direction is shifting toward normalization.
Inflation Seen Returning to Target by 2026
Martin expects inflation to gradually align with the Fed’s 2% goal by 2026, supported by stabilizing energy prices, easing housing costs, and improved supply chain efficiency. This outlook strengthens the case for a measured easing cycle ahead.