Danske Bank: Still expects the Fed to start cutting interest rates in June

Danske Bank said that the Federal Reserve kept Intrerest Rate unchanged, in line with expectations. Powell, for his part, did not provide new clues on the policy outlook, but stressed that the Fed continues to see its policy as restrictive to demand. Danske Bank believes that the Fed's interest rate cut is coming sooner than the market expects. Powell made it clear that the Fed's current policy is still in good shape. While the Q1 data weighed on confidence in the economic outlook, a further pullback in inflation is still possible as tight price pressures in the labor and housing markets continue to ease. He does not see the recent inflation data as a sign of a renewed rise in demand growth, and while Powell has been asked longest times about the possibility of another rate hike, he has completely avoided such speculation. All in all, Danske Bank has been calling for the Fed to make three 25 basis point rate cuts in 2024, starting in June. However, while Powell's comments today did not give them confidence in his view, the bank is currently assessing the view based on recent data and will discuss a possible correction after the release of the April non-farm payrolls data.