Barclays analysts are reportedly expecting the Federal Reserve to commit to reversing its hawkish monetary policy early this year.
The analysts predict that Personal Consumption Expenditures (PCE) will print an average of 1.9% on a seasonally adjusted annual rate for the last six months of 2023, Investing.com reports.
The PCE is an inflation indicator that measures the prices that people living in the US pay for goods and services. The Federal Reserve reportedly prefers to track the PCE over other inflation indicators.
With the PCE dropping within the Fed’s goal of 2% inflation, the bank is expecting the Federal Open Market Committee (FOMC) to go into a more accommodative monetary campaign beginning in March, reducing rates by 25 basis points at every other meeting.
The analysts believe that the Fed funds rate will drop to 4.25% to 4.50% by the end of the year and about 3.25 to 3.50% by the conclusion of 2025. Currently, the Fed funds rate stands at 5.25% to 5.50%.
Say the analysts,
“We view our rate cut projection largely as a recalibration of the nominal policy rate in light of the lower inflation, and it is predicated on a continued moderation in inflation measures…
Our rate cut projection also does not reflect political considerations surrounding the upcoming elections. Instead, we think the FOMC will base its rate decisions on economic considerations and primarily on the inflation outlook.”
Barclay’s rate cut forecast has been bumped up to March from June.
“It’s the macro. The stores of value that don’t generate interest – which is why investors like Warren Buffet don’t like them at all – but they behave really in relation to interest rates. That’s the big cycle, and interest rates are headed down, directionally speaking.
So the macro behind Bitcoin and gold are very strong. By the way, they kind of do perform similarly. They both peaked in 2021, they’ve both been rallying [last] year, obviously, Bitcoin way more than gold for different reasons.”
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