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HomeWorld NewsInterest rates may only experience 1-2 cuts this year

Interest rates may only experience 1-2 cuts this year

UK still stalling, EU uncertainty due to political pressure

FED likely to keep interest rates at 5.25%-5.5% in 2024, just 1-2 cuts expected amid steady inflation and strong job market

Federal Reserve and Interest Rates

At the start of 2024, traders anticipated the U.S. Federal Reserve would reduce interest rates up to seven times by December. However, analysts now expect the Fed to maintain its current rate of 5.25% to 5.5%, a 23-year high, with projections of just one or two cuts this year, down from three. U.S. inflation data, due just before the Fed’s meeting, is expected to show a 3.5% increase in consumer prices excluding food and energy for May, a slight drop from April’s 3.6%.

Stock Market and Interest Indicators

Despite the cautious outlook on interest rates, Wall Street remains optimistic. The S&P 500 and the Nasdaq have hit record highs, driven by significant interest in artificial intelligence, highlighted by Apple’s recent AI feature announcements. The benchmark 10-year Treasury yield has fallen to approximately 4.4%, continuing a two-week decline. The U.S. job market showed unexpected strength last month, with accelerated wage growth, despite signs of economic softening.

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United Kingdom

In the UK, economic growth stalled in April after a robust start to the year. The Office for National Statistics reported flat GDP growth for April, following a 0.4% increase in March. Employment figures revealed falling employment and rising unemployment, though wage growth remained strong. Financial markets have not reacted strongly to these figures, with a Bank of England interest rate cut next week still seen as unlikely. Current Finance Minister Jeremy Hunt highlighted a 0.7% growth over the three months to April, the fastest in nearly two years. The Labour Party is leading in opinion polls ahead of the national election on July 4.


The euro is near a 22-month low against the British pound, influenced by political uncertainties following gains by far-right parties in European Parliament elections. Polls indicate that France’s National Rally could win a snap vote called by President Emmanuel Macron, adding to market jitters.


China’s consumer inflation remained steady in May, with the CPI rising 0.3% year-on-year, consistent with April’s increase but below the forecasted 0.4%. Producer prices, which have been in deflation since September 2022, fell by 1.4% in May, improving from April’s 2.5% decline. Despite multiple support measures, weak domestic demand persists, prompting calls for stronger fiscal and monetary stimulus to boost the economy. China’s core inflation measure, excluding food and energy, slowed to 0.6% in May from April’s 0.7%, reflecting ongoing challenges in stimulating demand.

Japan and the near-zero interest rate

Japan’s economic data showed a 2.4% rise in producer prices in May, influenced by the yen’s weakness against the U.S. dollar, which raises import costs. Real wages adjusted for inflation fell for the 25th consecutive month in April, complicating the Bank of Japan’s efforts to move away from near-zero interest rates. The central bank’s policy decision is expected on Friday, following a previous rate increase from minus 0.1% to a range of zero to 0.1% in March, the first in 17 years.

Stock Market Performance

Global stock markets showed mixed performance. In Europe, Germany’s DAX and France’s CAC 40 saw gains of 0.5% and 0.4% respectively, while London’s FTSE 100 rose 0.8%. In Asia, Tokyo’s Nikkei 225 fell by 0.7%, Hong Kong’s Hang Seng index dropped by 1.3%, and Shanghai’s Composite index gained 0.3%.

Oil, Commodities and Cryptocurrencies

U.S. crude oil prices increased by $1.12 to $79.02 per barrel, and Brent crude rose by $1.08 to $83 per barrel. The U.S. dollar weakened against the Japanese yen and the euro, with respective exchanges at 156.20 yen and $1.0830.

Bitcoin rose 3.2% to $69,410.82, while Ether increased by 4.4% to $3,640.35, reflecting continued interest in digital assets.

Corporate Highlights

Paramount Global shares fell 2.8% before the bell following a significant drop the previous day. Oracle shares jumped 8% in off-hours trading due to a new partnership with Google and strong full-year guidance.

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