Here’s why the Fed’s minutes hint that most investors are set to be disappointed come end January

On January 3rd, the Fed released its minutes for the meeting in December 2023.

At the time, it decided to hold interest rates steady, but seemed to hint at rate cuts in the near future.

Well, now that the minutes are out and we’ve entered January (the next rates decision Fed meeting is scheduled for end January) could well hint that many investors are set to be disappointed.

Read our prediction here: Rate cuts are coming in 2024. But not as soon as you think.

Many seem to be expecting rate cuts to begin as early as this month, beginning a dovish period as intense as 2021 and 2022 rate hikes were. However, the Fed’s minutes seem to suggest something quite different.

Cuts likely to only come later this year

This is what the FOMC minutes had to say:

In discussing the policy outlook, participants viewed the policy rate as likely at or near its peak for this tightening cycle, though they noted that the actual policy path will depend on how the economy evolves… Most participants noted that, as indicated in their submissions to the SEP, they expected the Committee’s restrictive policy stance to continue to soften household and business spending, helping to promote further reductions in inflation over the next few years. In their submitted projections, almost all participants indicated that, reflecting the improvements in their inflation outlooks, their baseline projections implied that a lower target range for the federal funds rate would be appropriate by the end of 2024.”

In other words, rate hikes likely to begin by Q4, even December itself, in 2024. Not rate hikes likely to begin in early 2024 to end by December 2024.

The expert’s opinion

This decision was no surprise to markets expert David Buckham, the author of Why Banks Fail and The End of Money – although he felt it would surprise a lot of other bullish and blindly optimistic investors out there.

In an exclusive interview with Invezz, Buckham had this to say:

What we’ve seen now is 11 consecutive rate raises and then two pauses on rates, and we’ve seen inflation coming down strongly. And the market is predicting that there’ll be between five and seven rate cuts in 2024… Here’s my view: I think that the market is too optimistic.

Buckham reminds us all that the Fed is more far-seeing than the average individual investor, and for them it’s still important to avoid repeating mistakes from fifty years ago.

The US has to stay the course. I would be very surprised if the US consecutively reduces interest rates seven times. Inflation in the 1980s surged, then declined and then surged again – we don’t want that again.”

The minutes’ opinion

Another passage in the Fed’s minutes released yesterday seem to confirm this:

Participants also noted, however, that their outlooks were associated with an unusually elevated degree of uncertainty and that it was possible that the economy could evolve in a manner that would make further increases in the target range appropriate. Several also observed that circumstances might warrant keeping the target range at its current value for longer than they currently anticipated.”

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