REAL ECONOMY BLOG | March 28, 2024
Authored by RSM US LLP
Our modified Taylor Rule implies that the federal funds policy rate should be reduced to a range between 4.75% and 5% in the near term which underscores our call for the Federal Reserve to reduce its policy rate at the June meeting.
Given our forecast of a modest 2.1% pace of growth this year, a cut in June is aligned with our call of three rate cuts this year.
While the U.S. economy continues to outperform its peers, a combination of a rules-based approach and discretion strongly implies that the federal funds rate is currently restrictive. If maintained, it will result in rising real rates and tip the economy toward higher unemployment and lower growth—below the long-term trend of 1.8%—than would otherwise be necessary.
This article was written by Joseph Brusuelas and originally appeared on 2024-03-28. Reprinted with permission from RSM US LLP.
© 2024 RSM US LLP. All rights reserved. https://realeconomy.rsmus.com/federal-reserves-policy-path-points-to-a-rate-cut-in-june/
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