Allianz Global Investors: The Federal Reserve is expected to cut interest rates for the first time in June

Franck Dixmier, chief investment officer of global fixed income at Allianz Global Investors, commented before the Fed’s interest rate meeting, pointing out that the Fed is not expected to cut interest rates in view of the continued inflation in the United States. Fed Chair Jerome Powell’s recent comments suggest the possibility of a shift to accommodative policy later in 2024. Allianz expects the Fed to cut interest rates for the first time in June when the economic slowdown leads to falling prices. He said that since the beginning of the year, central banks’ interest rate cut expectations have been sharply lowered and continue to exacerbate interest rate market volatility. But the Fed’s upcoming meeting is unlikely to provide investors with any substantial new information. Speaking at a Senate hearing on March 7, Powell said that the Fed is increasingly confident that it will be able to cut interest rates by ensuring that prices will float at the 2% level. He added that it would be appropriate to cut interest rates in 2024. As a result, inflation data in the coming weeks will be decisive in validating market expectations, which have now postponed the first rate cut until July. The latest US retail sales data fell short of expectations, and Allianz believes that the decline in demand reflects a slowdown in the economy, which will be a decisive factor in price action in the coming months and could prompt the Fed to cut interest rates at its June meeting.