Interest rates, but where will we end up?
The central banks let's repeat it are aiming to keep rates high for as long as possible and unimaginable and of which we are now used to in this historical period. What we are learning about, however, is that the Fed is going to start cutting them, but from when?
The first cut in the cost of money by the U.S. Federal Reserve will occur in approximately 2024, exactly between May and June. An extension of the previous estimate that saw this maneuver months earlier. One macroeconomic effect that we will absolutely feel will be the monetary tightening, which will be felt, but in delayed bursts to the detriment of workers, small and medium-sized businesses, and especially to the detriment of consumers.
Jackson Hole's own Fed governor has said that the fight against inflation is by no means over, hinting at this maneuver that will permanently, hopefully, turn U.S. monetary policy around and most likely bring its effects overseas, Europe watching with interest.
What is certain is that Wall Street will not sit idly by, rather trying to eavesdrop on any useful and new details to move in time, while also trying to weigh every single word of the Governor, who has been cautious in properly defining this cut. It is also true that inflation is not giving so much maneuver to the government, if it reaches the 2% target next year a cut will be inevitable but also necessary.
2024 what to expect:
if in recent years and especially months we have seen a 2023 full of interest rate hikes and thus in a chain a sharp reduction in the money supply in the domestic economy, causing businesses and consumers to be discouraged from making more expensive loans, thus reducing demand. Because an imbalance between too much supply and too little demand would be generated, local prices would have to settle along with inflation. Obviously, the more rates of interest are raised, the more the domestic currency gains value in the Forex market. Profitability would shift largely into safer investments such as treasury bills and bonds, leaving other markets such as cyptos behind.
in 2024, however, the reversal of the trend is announced; keep an eye on the start of the interest rate cut. They will lead loans to be more attractive and investments that pay interest to be less appealing; investors would then be more willing to take greater risks in equity markets to increase their return in the portfolio or indeed take refuge in the crypto market, we can hope an high invest in this market.
(Don't forget to watch out for the value of the dollar, a big turbulence would cause the dollar itself to sink; we are talking about uncommon cuts such as a 0.50 percent.)
Bicci