Wall Street traders, as a result, have boosted their forecasts for rate cuts, with futures pricing indicating they now expect three rate cuts by the Fed this year, up from just one a month or so ago. Those rate reductions could help bring down borrowing costs for mortgages, auto loans, credit cards, and business loans.
Yet as Fed governor Christopher Waller noted Thursday, there are “good news” cuts and “bad news” cuts. “Bad news” cuts occur if the Fed reduces rates out of concern that the economy is slowing, while “good news” reductions are those that reflect a sense by the Fed that inflation is returning to its target of 2%.
Waller added that he still believes it will be possible for the Fed to engineer “good news” rate cuts later this year, though he dismissed the potential for a cut at the Fed's next meeting this month.