Markets demand Fed signals for imminent rate cuts
Markets want certainty that the rate-cutting cycle will begin imminently, rather than be drawn into a prolonged and unnecessary delay.
The Fed needs to act pre-emptively rather than reactively. (Image: Freepik)
The Federal Reserve is set to leave interest rates unchanged today, but markets need a definitive signal that cuts are coming—and soon, affirms the CEO of one of the world’s largest independent financial advisory and asset management organizations.
The comments from deVere Group’s Nigel Green come as US central bank officials at Wednesday’s meeting are expected to hold interest rates steady at between 4.25% and 4.5%, but modify their views on the economy.
He says: “The Fed’s key interest rate remains restrictive in an economic landscape where inflation is cooling, growth is slowing, and external risks due to tariffs, among other factors, are rising.
“The latest US Consumer Price Index (CPI) data shows inflation easing to 2.8% year-on-year, down from 3% in January. Monthly inflation ticked up just 0.2%, a steep drop from the prior month’s 0.5% gain.
“Meanwhile, key industries are showing signs of strain, wages are climbing faster than expected, and inflation expectations have surged in recent weeks.
“Against this backdrop, the Fed needs to act pre-emptively rather than reactively. Investors, businesses, and consumers all need clarity that monetary policy will evolve to meet shifting economic realities.”
Adding to the urgency is the growing threat of trade disruption. Former President Donald Trump’s tariff threats risk driving up consumer prices while simultaneously weighing on growth.
“This dangerous mix puts the Fed in a precarious position: delay action for too long, and the economy could tip into a recession,” notes the deVere CEO.
He continues: “A well-signalled pivot toward rate cuts would provide stability and ensure inflation expectations remain anchored.
“A clear indication today that easing will begin at the next meeting would restore market confidence, support equities, and relieve pressure on risk-sensitive currencies.
“The dollar’s trajectory will also be influenced by the Fed’s tone, as a dovish shift would likely weaken the currency, fueling momentum in global markets.”
However, if Powell and his colleagues deliver only vague reassurances without a firm commitment, expect heightened volatility.
“Investors are no longer willing to wait indefinitely while the Fed assesses data.”
Markets want certainty that the rate-cutting cycle will begin imminently, rather than be drawn into a prolonged and unnecessary delay.
Nigel Green concludes: “The Fed won’t move today, but it must make it clear that cuts are imminent. A lack of decisive communication could trigger market instability, while a well-telegraphed shift would provide a necessary cushion against emerging risks. The world is watching. The question now is whether the Fed will deliver.”
