Expectations of only one rate cut this year rise as the Fed wraps two-day meeting today

The US Federal Reserve is now expected to make one only interest rate cut this year, down from expectations of at least two or three rate cuts this year, amid persistent concerns about the lingering inflationary pressures, according to a new Financial Times-Chicago Booth economist poll. Over half of the 39 polled academic economists forecast a single 25-bps cut in 2024, while a quarter of the analysts anticipate no cuts at all. The forecast comes as the Fed wraps its two-day June meeting today.

With only four meetings left in the year, “rapid-fire” cuts in the current climate are unlikely, economists say. “The Fed’s narrative is going to be very similar to what we’ve been hearing: ‘We’ve made progress bringing down inflation; we’re not in a hurry to cut rates,’” Nathan Sheets, a former senior economist at the Fed, currently global chief economist at Citi, told the Associated Press.

The key data everyone is waiting for: US inflation figures will be out today, ahead of the Fed’s “dot plot,” which will set expectations for the rate cuts to come. Inflation fell to 3.4% in April.

When will the Fed deliver the cut? A third of the polled economists anticipate the Fed pulling the trigger on the first cut in September, the Fed’s final meeting before the presidential elections. Investors are also banking on the Fed to begin cutting rates in September as well, according to the CME FedWatch Tool.

Traders are already unwinding their positions on a rally following the meeting, as investors price in just one cut this year, Bloomberg reports. Yields on 10-year notes have also climbed near 4.48% earlier this week.

Economists’ optimism for a soft landing for the US economy has also increased, with 52% of FT’s poll respondents now predicting that the US will not fall into a recession until 2026 or beyond, compared to 46% in March.

ALSO ON PLANET FINANCE- Kuwait’s first IPO in two years: Beyout Investment Group has made its debut on the Boursa Kuwait, the bourse’s first in around two years, according to a press release (pdf). The company raised some USD 147 mn from taking a 30% stake to market. Our friends at EFG Hermes UAE were joint bookrunners and global coordinators on the offering alongside the National Investments Company.

MARKETS THIS MORNING-

Asian markets are once again mixed as investors mull inflation data out in China, as well as expectations of inflation data from India and the US later today. Hong Kong’s Hang Seng and Japan’s Nikkei both opened lower, while South Korea’s Kospi was up 0.45%. Wall Street futures are little changed as traders await the Fed’s decision today.

THE CLOSING BELL-

The ADX remained flat yesterday on turnover of AED 1.3 bn. The index is down 6.0% YTD.

In the green: PureHealth (+7.5%), Taqa (+7.2%) and National Bank of Umm Al Qaiwain (+5.6%).

In the red: Rapco Investment (-3.0%), Manazel (-2.6%) and Phoenix Group (-2.2%).

Over on the DFM, the index closed up 0.9% on turnover of AED 312.9 mn. Meanwhile Nasdaq Dubai closed up 0.2%.

CORPORATE ACTIONS-

Dubai Investments appointed xCube as the new liquidity provider for its shares on the Dubai Financial Market, effective yesterday, a company statement (pdf) reads.

BHM Capital carried out price stabilization mechanisms for Spinneys’ listed stocks on the DFM, according to a DFM disclosure (pdf). Spinneys had tapped BHM Capital as its price stabilization manager back in April, allowing the firm to conduct price stabilization transactions to prop up Spinneys’ share prices.

SOUND SMART- Price stabilizing mechanisms involve underwriters purchasing shares in the secondary market to manage volatility in share prices after an initial public offering or other transactions. Think of it as a really strategic share-buyback program run by a banker with the aim of helping a share perform better out of the gate. Share stabilization programs are typically time-limited and wrap up in a matter of weeks after a transaction.