Skip to main content
Market Update

Fed is no longer at the front of the pack as rate-cut conversations shift abroad

May 13, 2024
  • amol dhargalkar headshot


    Amol Dhargalkar

    Managing Partner, Chairman
    Global Head of Corporates

    Kennett Square, PA


A slew of Federal Reserve leaders spoke last week, with many remaining noncommittal on the timing of a first interest rate cut, while other central banks are already entering cutting cycles. On the commodities side, crude oil and gold both saw price gains last week on the back of increased confidence in demand and weaker domestic economic data.

Fed officials waiting for more data before committing to a cut

Federal Reserve officials re-entered the public eye last week, addressing the potential timing for an upcoming rate cut and the economic data that will inform that decision. Richmond Fed President Tom Barkin said last Monday that he is “optimistic” about the Fed’s fight against inflation thus far, but that it is still too soon to tell if recent bumps in the road anomalies or indicative of a longer journey are ahead. Patience was the dominating sentiment in remarks from several Fed leaders, including New York Fed President John Williams, Minneapolis Fed President Neel Kashkari, San Francisco Fed President Mary Daly, and Boston Fed President Susan Collins. No official put forth a real timeline for anticipated rate cuts; instead, each emphasized a need to see more consistent inflation figures before action can be taken.

Market predictions of the timing of the Fed’s next move are still in flux, though they seem to have settled into agreement that a rate hike is off the table. As of Friday, markets were pricing in two or three rate cuts for the remainder of 2024, with opinions fairly split on exactly when those cuts will come. This is largely in line with the most recently published Federal Open Market Committee (FOMC) economic projections, which estimated roughly three 25-basis-point rate cuts this year.

Source: CME FedWatch Tool, as of 11:30 a.m. EDT

Are consumers finally feeling it?

Though last week was a slower one for economic releases, the data published did provide a noteworthy checkpoint on the status of American consumers. On Friday, preliminary University of Michigan Survey of Consumers figures fell over 12.00% from April to May, indicating that consumers may be getting nervous about the domestic economy’s path forward. The outlook for inflation on the one-year and five-year horizons also ticked up, reaching their highest levels since November at 3.50% and 3.10%, respectively. To cap it off, jobless claims for the prior week came in above expectations, hitting their highest reading since August of last year. Markets will be watching for not only next week’s CPI figures but also retail sales data from April to get a better picture of the state of domestic employment.

The world is not waiting on the Fed to cut rates

While the overall resilience of the U.S. economy continues to push off projections of a first interest rate cut in the U.S., other central banks have begun to cut rates or have indicated that cuts will be coming soon. This marks a departure from historical trends, as the Fed has typically led the charge towards rate cuts (and hikes). At the Bank of England’s (BoE) May meeting last week, the Monetary Policy Committee (MPC) voted 7-2 to maintain the current bank rate at 5.25%, with the two dissenting members both voting for an immediate cut to rates. Governor Andrew Bailey stated that there may need to be “more [cuts] than currently priced into market rates,” leaving a June cut on the table in his remarks last Thursday, though the MPC will be closely monitoring inflation data before making any decisions. Bailey also made clear that the BoE will move independently of politicians (at home and abroad), and the MPC will not factor in the actions of the Fed as they chart the path forward for interest rates in the U.K.

In the E.U., per the April meeting minutes released last Friday, the European Central Bank (ECB) is poised to enact its first rate cut at the upcoming June meeting provided there are no surprises in the interim wage and inflation data releases. Markets are anticipating one or two additional cuts in the E.U. following the June cut, which is already priced in. Some European countries have already jumped ahead of the Fed and cut interest rates, notably including the Swiss Central Bank, which initiated a 25-basis-point rate cut at the end of March (though inflation in the nation had been below 2.00% for multiple months prior). The central banks of Hungary, Czechia, and Sweden have also cut interest rates in recent weeks and months.

The Fed’s chosen timing for rate cuts will undoubtedly have global economic implications, but central bank leaders have emphasized that their respective focuses remain on their own countries’ inflation data. That said, a lack of uniformity among central bank actions can impact the strength or weakness of the U.S. dollar, as well as other exchange rates between currencies. Monitoring central bank decisions is essential for assessing the FX risk exposure of one’s company.

Commodity markets update

After a brief slump, Brent crude prices popped back up above $84.00 per barrel at the tail end of last week, though volatility persisted over the course of the day on Friday. Demand concerns in the U.S. and China were assuaged enough for markets to feel more confident, though a lack of successful ceasefire negotiations between Israel and Hamas has kept geopolitical uncertainty relevant to pricing conversations.

Gold prices also had a stronger week last week, as weaker economic releases out of the U.S. propelled confidence in future rate cuts, which in turn fueled the markets for gold and other precious metals. Spot gold saw a gain of more than 3.00% last week, with futures up almost 2.00%.

The week ahead

In addition to even more “Fed speak” on the docket, this week brings fresh CPI and PPI reports on Tuesday and Wednesday, respectively, which will further shape the path forward for interest rates. More housing and consumer data will also fill in the picture of the current state of the domestic economy.

Subscribe to receive our market insights and webinar invites

About the author

  • Amol Dhargalkar

    Managing Partner, Chairman
    Global Head of Corporates

    Kennett Square, PA

    Amol Dhargalkar is a Managing Partner and Chairman for Chatham’s Board of Directors. He is the Global Head of the Corporates sector and brings over 20 years of experience in derivatives capital markets expertise.


Chatham Hedging Advisors, LLC (CHA) is a subsidiary of Chatham Financial Corp. and provides hedge advisory, accounting and execution services related to swap transactions in the United States. CHA is registered with the Commodity Futures Trading Commission (CFTC) as a commodity trading advisor and is a member of the National Futures Association (NFA); however, neither the CFTC nor the NFA have passed upon the merits of participating in any advisory services offered by CHA. For further information, please visit

Transactions in over-the-counter derivatives (or “swaps”) have significant risks, including, but not limited to, substantial risk of loss. You should consult your own business, legal, tax and accounting advisers with respect to proposed swap transaction and you should refrain from entering into any swap transaction unless you have fully understood the terms and risks of the transaction, including the extent of your potential risk of loss. This material has been prepared by a sales or trading employee or agent of Chatham Hedging Advisors and could be deemed a solicitation for entering into a derivatives transaction. This material is not a research report prepared by Chatham Hedging Advisors. If you are not an experienced user of the derivatives markets, capable of making independent trading decisions, then you should not rely solely on this communication in making trading decisions. All rights reserved.