High mortgage rates make it difficult for prospective home buyers to enter the market.
If the Federal Reserve lowers interest rates next year, lending rates may decrease.
Here are nine predictions from experts on when the Fed’s first rate cut will come.
High mortgage rates are effectively frozen US housing market. And while lower rates may be on the horizon, Americans may have to wait a little longer.
Average rate for 30 years Fixed-rate mortgage At the beginning of 2022, it was about 3% to more than 7%. This has deterred first-time home buyers from taking the plunge and existing homeowners are reluctant to sell their home and buy another one – preferring to stick with the lowest rates. They are already closed.
In the meantime, the lack of people selling their homes has contributed to the lack of housing inventory Raising pricesIt may not be Throw away anytime soon. These factors act as a hedge for future buyers, as interest rates may not remain at this level forever.
The Federal Reserve raised interest rates to fight inflation, but not much Experts predict He moves more carefully – and perhaps Reduce prices – Over the next 12 to 18 months, in response to slower inflation and a Weakening the US economy.
It does not directly result in a decline in interest rates. The mortgage rate will decrease, the two tend to move in the same direction. That’s why prospective homebuyers would be wise to keep an eye out for when the Federal Reserve’s first interest rate cut is likely to come — despite rates. Something unlikely to return To where they were a few years ago.
Insider has compiled nine of the latest expert predictions for when the first rate cut will come. The predictions are listed in chronological order – experts who expect the slowdown to come soon are listed first.
Just at the end of the year
In an interview with Bloomberg Television on Tuesday, JP Morgan Asset Management’s chief investment manager Bob Michel said the Fed would probably be out before the end of the year — and Start cutting interest rates.
“They tell us that they will continue to raise prices for a long time until they reach their inflation target,” he said. But the rate of slowdown we’re seeing across the board tells us that we’re probably going to hit a recession by the end of the year, so it’s going to lower prices then.
On August 31, Morningstar’s top US economist, Preston Caldwell; He wrote In February, the Fed is expected to start cutting interest rates.
“As inflation falls to its 2% target and the need to expand economic growth is a primary concern, the Fed will begin easing monetary policy,” he wrote.
Not before April
Last month, David Einhorn, founder and president of Greenlight Capital, wrote that he did not expect the Fed to taper. Interest rates Until next year.
“We continue to believe that the market is over-expecting rate cuts and have extended that outlook to March 2024,” he said.
After releasing the August inflation report, KPMG’s US Chief Economist Diane Swank said: He wrote Noting that the Federal Reserve may not act to raise interest rates.
“The Fed needs to watch inflation in quarters, not months. We’re not even close,” she wrote. “We maintain our forecast for the first rate cut in May 2024.”
Separately, according to CME Group FedWatch deviceIt calculates the odds of various Fed interest rate moves based on what traders do in derivatives markets linked to those rates, with a 19% chance of a rate cut in March. In May, the odds jumped to 82.3 percent.
Between April and June
By Reuters Poll Among 97 economists polled between September 7 and Tuesday, the consensus forecast was that the Fed would not cut interest rates until April through June.
Andrew Hollenhorst, chief U.S. economist at Citi, said: “Tight labor and housing markets pose significant risks to inflation. They spoke “This means policymakers are likely to keep policy rates on hold until 2024 without a recession,” Reuters said.
2nd quarter of 2024
In a Sept. 7 episode of the “Goldman Sachs Exchange” podcast, Goldman Sachs U.S. Chief Economist David Mericle said he had laid out the Fed’s initial plan. Reduction of interest rate Due in the second quarter of 2024.
“And the best guess is we’ll go back to 2%,” he said of inflation. But by no means are we there or close enough. So it’s not too soon to say that we have overcome this problem.
Between May and the end of 2024
On Monday, economists from some of North America’s biggest banks said they expected the Fed to cut rates between May and the end of next year.
“Given the observed and expected developments in inflation, most committee members believe the Fed’s tightening cycle remains on track,” said Simona Mokuta, chief economist at State Street Global Advisors.
Second half of 2024
On a Thursday NoteThe Vanguard Global Economics and Markets Group wrote that the Fed does not expect to cut interest rates until the second half of 2024.
The group said, “We believe that the cause of the easing may be a recession or a fall in inflation as economic activity remains strong (“soft landing”). he said..
Later next year
According to Jeff Morton, portfolio manager at DWS Group The interest rate will decrease They could not come until next year.
“We’ve pushed our cut forecast forward into next year, which would mean a quarter-on-quarter cut barring any serious recession,” he said.
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