Investment Institute
Weekly Market Update

Take Two: Fed signals fewer rate cuts in 2024; Macron calls snap election

  • 17 June 2024 (3 min read)

What do you need to know?

The Federal Reserve (Fed) kept interest rates at the 5.25%-5.50% range at its monetary policy meeting last week but shifted from projecting three cuts this year to just one, and four cuts in 2025 instead of three. It said only modest progress had been made on inflation, but Fed Chair Jerome Powell admitted the rate projections for this year were “very close calls”. We continue to expect two rate cuts this year and four next. Meanwhile US inflation eased to an annual rate of 3.3% in May, from 3.4% in April while core inflation, which excludes energy and food prices, ticked down to 3.4% - a three-year low - from 3.6%.


Around the world

European markets endured a period of volatility last week, after France’s President Emmanuel Macron called a snap election following the European Parliament elections where far-right parties received very strong support. France’s CAC 40 and Europe’s Stoxx 600 both fell over the week, along with French government bond prices. Elsewhere, the World Bank raised its global growth forecast for 2024 to 2.6% from an earlier estimate of 2.4%. It continues to expect growth of 2.7% in 2025-2026, “well below” the 3.1% pre-pandemic average. AXA IM expects global growth of 3.2% this year and next.

Figure in focus: -1.8%

Japan’s economy shrank less in the first quarter than originally estimated, thanks to revisions to capital spending and inventory data. A fresh estimate showed the country’s GDP contracted 1.8% (annualised), slightly less than the 2% contraction earlier reported. The data added to expectations the Bank of Japan (BoJ) could raise interest rates again this year after tightening policy in March; it kept rates unchanged at its monetary policy meeting last week but stated it would outline a detailed plan to start trimming bond purchases at its July meeting. Markets had expected guidance at the June meeting, so the delay suggests the BoJ is still cautious when it comes to further adjustments to monetary policy. 


Words of wisdom

Dragon Boat Festival: A three-day Chinese public holiday on the fifth day of the fifth month in the Chinese calendar, which ended last Monday. It commemorates a hero, varying by region, including the Chinese poet Qu Yuan. This year’s festivities look to have provided a welcome boost to the world’s second largest economy as China enjoyed a marked rise in tourism spending and travel. Around 110 million trips took place during the Dragon Boat Festival this year, a 6.3% rise on 2023, while domestic travel spending increased by 8.1% to 40.4bn yuan ($5.6bn), according to official data.

What’s coming up?

On Tuesday the Reserve Bank of Australia holds its monetary policy meeting and the Eurozone delivers its final estimate for May’s inflation rate – the bloc’s annual rate increased for the first time in five months from 2.4% to 2.6%, an earlier estimate showed. Wednesday sees the BoJ publish the minutes from its latest monetary policy meeting while the UK updates on inflation. On Thursday the Bank of England meets to decide on interest rates. Friday sees Japan report its own inflation data while a spate of Purchasing Managers’ Indices are published, including those for Japan, India, the UK, the Eurozone, and US.

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