What To Expect From The Fed On Interest Rates For The Rest Of 2024 (2024)

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What To Expect From The Fed On Interest Rates For The Rest Of 2024? ›

Fixed income markets as assessed by the CME's FedWatch Tool are currently looking a federal funds rate

The widespread expectation is for a cut of 0.25 percentage point, or 25 basis points, to benchmark rates, from the current range of 5.25% to 5.5%. The Fed is seen as likely to keep easing policy into the end of the year after that.

The Mortgage Bankers Association didn't include mortgage rate predictions in its August 2024 Economic Forecast, but its latest forecast in May 2024 showed rates falling from 6.4% in January to 5.9% in December.

And many more cuts will likely follow: The federal-funds rate will most likely be in a range of about 3% to 3.25% by December 2025, according to recent futures market pricing. That marks a relatively fast drop from the current level of 5.25% to 5.5%, where rates have stood since July 2023.

Looking further ahead, financial markets are forecasting base rate will fall to around 4 per cent by the end of next year before eventually settling at around 3.5 per cent in 2027.

Axos Bank: Fed Funds Rate To Fall Between 0.25% to 0.50%

Anthony Capizzano, senior vice president of consumer lending at Axos Bank, predicts the federal funds rate will likely fall between 0.25% to 0.50% in 2024. He also says some lenders have already reduced personal loan rates in anticipation of rate cuts.

A quarter-point reduction at the Fed's Sept. 17-18 meeting is still seen as the slightly more likely outcome, but only marginally so. Futures tied to the Fed's policy rate now reflect about a 47% chance that the Fed will cut its policy rate, currently in the 5.25%-5.50% range, by a half of a percentage point.

Lawrence Yun, chief economist at the National Association of Realtors, even told CNBC last year that he doesn't think mortgage rates will reach the 3% range again in his lifetime.

For the end of 2026, the median dot now shows a target range of 3% to 3.25%, versus 2.75% to 3% three months ago. And officials' median longer-run estimate was for a target range of 2.5% to 2.75%, also a quarter of a percentage point higher than in December.

In July 2023, overnight interest rate climbed to 5%, the highest since 2001. We expect the overnight interest rate to decline between 1.5% to 2% from its peak by the end of 2026. The long-term trend of declining yields has ended and we are unlikely ever to see low rates like those of 2020-2021 or the 2009-2010 again.

What will CD rates be in 2026? ›

The Federal Open Market Committee (FOMC) announced on January 31, 2024, that it would maintain its policy rate in a range of 5.25% to 5.5%. The January decision marks the fourth straight meeting at which the Federal Reserve (Fed) has opted to hold interest rates steady.

At its meeting ending on 31 July 2024, the MPC voted by a majority of 5–4 to reduce Bank Rate by 0.25 percentage points, to 5%. Four members preferred to maintain Bank Rate at 5.25%. The Committee has published an updated set of projections for activity and inflation in the accompanying August Monetary Policy Report.

According to the Summary of Economic Projections, the Fed may implement up to three 25-basis point interest rate cuts in 2024—bringing the federal funds rate closer to 4.60%.

Following the August base rate cut, mortgage rates on fixed rate mortgages have been falling as lenders slashed rates. Many experts are predicting one further base rate cut in 2024 and for interest rates to fall to around 4% by the end of next year.

Initially higher ratespeeking around 5.2% in 0324, then gradually lower rates falling to around 4.5% in late 2024 .

Also, Wednesday's rate cut will likely be just the first in a series. Futures markets show investors think the Fed will cut its target range by a total of 1.25 percentage point by the end of this year, and another 1.25 point in 2025.

If the Federal Reserve Board raises the target interest rate by 25 basis points, it means that rates have risen by 0.25% percentage points. If rates were at 2.50%, and the Fed raised them by 25 basis points, the new interest rate would be 2.75%. Basis Points.

US Fed rate cut: The US Federal Reserve is poised to cut its benchmark policy rate for the first time since March 2020, responding to signs of an economic slowdown and easing inflation.