The Fed Will Not Cut Rates in 2024

Apollo Chief Economist

The market came into 2023 expecting a recession.

The market went into 2024 expecting six Fed cuts.

The reality is that the US economy is simply not slowing down, and the Fed pivot has provided a strong tailwind to growth since December.

As a result, the Fed will not cut rates this year, and rates are going to stay higher for longer.

How do we come to this conclusion?

1) The economy is not slowing down, it is reaccelerating. Growth expectations for 2024 saw a big jump following the Fed pivot in December and the associated easing in financial conditions. Growth expectations for the US continue to be revised higher, see the first chart below.

2) Underlying measures of trend inflation are moving higher, see the second chart.

3) Supercore inflation, a measure of inflation preferred by Fed Chair Powell, is trending higher, see the third chart.

4) Following the Fed pivot in December, the labor market remains tight, jobless claims are very low, and wage inflation is sticky between 4% and 5%, see the fourth chart.

5) Surveys of small businesses show that more small businesses are planning to raise selling prices, see the fifth chart.

6) Manufacturing surveys show a higher trend in prices paid, another leading indicator of inflation, see the sixth chart.

7) ISM services prices paid is also trending higher, see the seventh chart.

8) Surveys of small businesses show that more small businesses are planning to raise worker compensation, see the eighth chart.

9) Asking rents are rising, and more cities are seeing rising rents, and home prices are rising, see the ninth, tenth, and eleventh charts.

10) Financial conditions continue to ease following the Fed pivot in December with record-high IG issuance, high HY issuance, IPO activity rising, M&A activity rising, and tight credit spreads and the stock market reaching new all-time highs. With financial conditions easing significantly, it is not surprising that we saw strong nonfarm payrolls and inflation in January, and we should expect the strength to continue, see the twelfth chart.

The bottom line is that the Fed will spend most of 2024 fighting inflation. As a result, yield levels in fixed income will stay high.

Consensus US GDP growth forecast for 2024 revised higher after the Fed pivot
Source: Bloomberg, Apollo Chief Economist
The underlying trend in inflation is moving higher
Source: BLS, Cleveland Fed, Atlanta Fed, Haver Analytics, Apollo Chief Economist
Supercore CPI rebounding
Source: BEA, Haver Analytics, Apollo Chief Economist
Wage inflation is sticky at 4% to 5%
Source: BLS, Apollo Chief Economist
NFIB survey shows more companies are looking to raise prices
Source: NFIB, BEA, Haver Analytics, Apollo Chief Economist
Manufacturing survey shows rise in prices paid
Source: FRBNY, Bloomberg, Apollo Chief Economist
ISM services price index showing upside risks to headline inflation
Source: ISM, BLS, Haver Analytics, Apollo Chief Economist
Small business survey points to accelerating wages
Source: FRB of Atlanta, NFIB, Haver Analytics, Apollo Chief Economist. Note: NFIB: Net percent planning to raise worker compensation in next three months (SA, %).
Asking rents rising
Source:, Apollo Chief Economist
100 largest US cities: Share of cities with positive rent growth is rising
Source:, Apollo Chief Economist
Rebound coming in housing inflation
Source: Haver Analytics, BLS, S&P, Apollo Chief Economist
Easier financial conditions point to a rebound in GDP growth
Source: BEA, Bloomberg, Apollo Chief Economist

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