- The Federal Reserve has been sending mixed signals on a possible change in monetary policy.
- McGlone compared the present economic climate to prior rate increase cycles.
Since US stocks have turned around, Bloomberg analyst Mike McGlone predicts that the Fed will soon reduce interest rates. At a critical juncture in the economic landscape after the pandemic, this prediction arrives as the Federal Reserve has been sending mixed signals on a possible change in monetary policy.
It seems like the central bank is about to switch gears from its aggressive rate-hiking strategy to a more accommodating one as inflation starts to fall and the job market starts to loosen.
Moreover, after a turn in US markets, according to Bloomberg analyst Mike McGlone, the Fed will lower interest rates. McGlone compared the present economic climate to prior rate increase cycles, mentioning, for example, that the Federal Reserve raised interest rates by 425 basis points (bps) between 2004 and 2006 and that the surprise index floor occurred in December 2006. Rates were first reduced in September 2007.
Major Change in Monetary Policy Likely
In light of the current situation, McGlone brought attention to the fact that the last 525 basis point increase in interest rates, which started in the first quarter of 2022, occurred in July 2023. But he did warn that high inflation might put off the Fed’s easing until overvalued stocks revert, which would be good news for gold prices.
Also, Federal Reserve officials have recently sent signals suggesting a major change in monetary policy, which is consistent with this forecast. Members of the Federal Reserve Board, notably Chair Jerome Powell, have voiced increasing confidence that they can manage inflation and are prepared to shift the Fed’s policy trajectory if needed. Crypto investors are eagerly awaiting for any positive move from the Fed’s, hoping to see a change in the ongoing bearish trend.
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