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The Fed will not reach its inflation target in 2024

According to Bureau of Labor Statisticsthe one-year inflation rate in April 2024 was 3.4%, which caused some are optimistic that the Federal Reserve (Fed) will lower interest rates later this year. I won’t guess what the Fed might do, but I’m confident it won’t hit its 2% inflation target in 2024.

If the Fed keeps its rates high until the target is encounteredit will be a while before he lowers them.

The increase in the CPI so far in 2024 was 2.2%, so if prices don’t rise for the rest of the year, the Fed’s target still won’t be met. be achieved. Prices would have to fall during the rest of the year to meet the target.

A drop in prices for a few months would not be unthinkable. Prices tend to increase more in the first semester than in the second half. (This is why the data is often seasonally adjusted.) From April to December 2023, the CPI increased by only 1.1%. Based on seasonal factors, we can expect the CPI increase less in the years second half than in the first.

If prices rise 1.1% for the rest of the year, the year-end inflation rate will be 3.3%, well above the Fed’s target and approximately what ‘he is actually.

The article linked above says “Feed President Jerome Powell made it clear Tuesday he thinks the Fed will need more than one quarter data value to Really judge whether inflation is falling steadily towards 2%. Looking at the numbers, it seems unlikely that we will see a significant decline in inflation for the rest of the year.

If this is the case, and if we take Powell’s statement at face value, an interest rate cut seems unlikely in 2024.