Synopsis:

Danske Bank has updated its forecast on the Federal Reserve's interest rate actions for 2024, now expecting fewer rate cuts than previously anticipated. This revision follows recent public statements by Fed officials and a series of economic data releases.

Key Points:

• Rate Cut Forecast: Danske now predicts the Fed will implement rate cuts only twice this year, specifically in September and December. This is a reduction from their earlier forecast of three cuts throughout the year.
• Rationale Behind Revision: The adjustment is based on stronger-than-expected structural growth in the U.S. economy and persistent inflation pressures outside of the housing sector.
• Economic Indicators: Recent labor market data suggests the U.S. economy is gradually moving towards broader disinflation, supporting the case for eventual rate cuts.
• Outlook: Although the forecast has been revised to fewer cuts, Danske maintains that risks are skewed towards more cuts rather than fewer in 2024, citing ongoing but slow economic cooling.

Conclusion:

Danske Bank’s revised forecast aligns with a cautiously optimistic view on the U.S. economy’s resilience. While acknowledging the potential for further rate cuts due to underlying economic trends, the update suggests a more gradual approach to monetary easing by the Fed. Investors and policymakers will likely continue to monitor incoming data closely, especially regarding non-housing inflation and overall economic momentum, to gauge the appropriate timing and extent of future rate adjustments.