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- Don’t expect the Federal Reserve to cut interest rates anytime soon, Richard Fisher says.
- The US central bank is unlikely to lower rates until 2024, the former Dallas Fed president said.
- Inflation has started to cool in recent months but remains well above the Fed’s 2% target.
Investors shouldn’t expect a boost to stocks from the Federal Reserve slashing interest rates until next year, the former boss of the Dallas Fed has warned.
Richard Fisher said on Thursday that the US central bank could pursue further hikes – and definitely won’t consider cuts – until it’s clear that inflation will fall to its target level of 2%.
“If you saw what the Bank of England did with 50 basis points, the Canadians, the Australians, there is still a possibility for one or two more [rate hikes],” he told CNBC’s “Closing Bell” in reference to other central banks rushing to cool soaring prices with further rate hikes.
“And at a minimum, they’re not going to be cutting rates in my view, as far as the eye can see, until 2024,” Fisher added. “My guess is they will just have to hold it where it is.”
The central bank raised borrowing costs at 10 consecutive meetings between March 2022 and May 2023 in a bid to tame inflation, which was running close to four-decade highs.
But it paused its tightening campaign at its most recent meeting last week, with chair Jerome Powell noting that policymakers were “seeing the effects of our policy tightening and demand in the most interest rate sensitive sectors of the economy, especially housing and investment.”
Investors shouldn’t view Powell’s words as a sign that the Fed will start cutting rates anytime soon, according to Fisher.
“I could’ve argued both sides at the last meeting, but I have no problem with their having paused,” he said. “But I do expect them to do a little bit more.”
Most traders expect the central bank to bring in one more rate hike in July, and to begin slashing borrowing costs by January 2024, according to CME Group’s FedWatch tool.
Future rate cuts would likely help to drive up stock prices, because people start getting lower returns from savings accounts, which incentivizes them to invest their cash.
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