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When Does the Industry Believe Interest Rates Will Drop?

Those waiting for interest rates to drop for the first time in almost 10 years will have to wait a bit longer, as the Federal Reserve decided Wednesday not to reduce rates.

“The Fed held rates steady today as it navigated a challenging balancing act between the easing of global central banks, investor speculation that cuts are necessary to combat slowing economic growth, and the futures markets pricing a high likelihood of a rate cut by July,” said Danielle Hale, Chief Economist for realtor.com. “The Fed ditched the previous ‘patient’ language it used and instead pledged to ‘closely monitor’ the data and ‘act as appropriate to sustain the expansion.’ This language shift opens up the possibility of a rate cut as soon as July if incoming data suggests weaker growth on the horizon.”

Hale said the Fed has two goals: maximize employment and stable prices. While the May Jobs report was below expectations, unemployment remains at record lows.

“This month, the Fed could have easily made the case for a scenario of more patience or a precautionary rate cut, but instead focused on responding as necessary to the incoming data,” Hale said. “We’ll see if [Wednesday’s] decision to hold rates steady unnerves investors, consumers, or businesses or if they find the Fed’s flexible posture reassuring.”

A survey from WalletHub found that there was a 23% chance that the Fed will reduce interest rate on Wednesday’s meeting. The chances of an increase, though, increase to 97% by September 18.

The Fed has increased interest rates nine times, with no decreases, since December 2015.

The survey stated that 76% of people support a rate cut, and around the same amount said it would be good for the economy.

“The Fed probably won’t cut its target rate at its June meeting,” said WalletHub CEO Odysseas Papadimitriou. “But future pricing indicates we’re almost certain to see a rate reduction this summer or early fall.”

About Author: Mike Albanese

Mike Albanese is a reporter for DS News and MReport. He is a University of Alabama graduate with a degree in journalism and a minor in communications. He has worked for publications—both print and online—covering numerous beats. A Connecticut native, Albanese currently resides in Lewisville.
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