Lower Interest Rates Likely in 2024

INTEREST RATE MARKET FUTURES

There has been a growing view in the past few months among analysts that the Federal Reserve had concluded its rate hiking cycle.

Futures quickly advanced yesterday when the U.S. Federal Reserve signaled interest rate cuts are possible next year.

Financial futures markets are predicting there is an 83% probability that the Federal Open Market Committee will reduce its fed funds rate by 25 points at its March 20, 2024 policy meeting.

STOCK INDEX FUTURES

Stock index futures advanced sharply yesterday, including a new record high for Dow Jones stock index futures, due to the Federal Open Market Committee’s policy statement and Federal Reserve Chair Powell’s press conference.

The Federal Reserve held interest rates steady and signaled inflation had improved more rapidly than anticipated, which opened the door to interest rate cuts next year.  Most officials penciled in three interest rate reductions next year in economic projections released after their two-day meeting on Wednesday.

Officials were careful not to rule out higher interest rates in their policy statement, which was little changed from recent versions that have said tighter policy remains possible.  Fed Chair Jerome Powell at a news conference said, “No one is declaring victory. That would be premature.”

Jobless claims in the week ended December 9 were 202,000 when 223,000 were expected.

Retail sales in November were up 0.3% when down 0.1% was anticipated.

Import prices in November declined 0.4% when down 0.7% was estimated, and export prices fell 0.9% when down 1.0% was forecast.

The 9:00 central time business inventories report for October is predicted to be unchanged.

The fundamentals and technicals remain supportive to stock index futures.

CURRENCY FUTURES

The U.S. dollar index quickly dropped to a four-month low due to the FOMC statement and Powell’s press conference.

The European Central Bank announced that it kept key rates unchanged following its policy meeting today. The interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will stay at 4.50%, 4.75% and 4.00%, respectively.

The Bank of England held its bank rate unchanged at a 15-year high at its policy meeting today, as expected, but signaled that interest rates must remain higher for a prolonged period to bring inflation down.

The Swiss National Bank kept its key policy rate unchanged at 1.75% for a second consecutive meeting today, which was in line with forecasts. Policy makers reduced their inflation forecast for next year, which suggests the bank could cut rates as early as March, 2024.

Japan’s core machinery orders in October increased 0.7% on the month when a decline of 0.4% was predicted.

 

Interested in more futures markets?  Explore our Market Dashboards here.

Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.

ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.                  

A subsidiary of Archer Daniels Midland Company.

© 2021 ADM Investor Services International Limited.

Futures and options trading involve significant risk of loss and may not be suitable for everyone.  Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.  The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM.  The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.

Latest News & Market Commentary

Explore the latest edition of The Ghost in the Machine

Explore Now