The Fed could still cut rates in July despite market’s ‘hawkish’ perception – Kristina Hooper

(Kitco News) – The Federal Reserve could still cut rates in July despite the market’s hawkish expectations of higher-for-longer rates this year, said Kristina Hooper, Chief Global Market Strategist at Invesco.

In a recent interview with Jeremy Szafron, Anchor at Kitco News, Hooper noted that consumer financial health and increasing debt pressures are a significant concern. 

“We are seeing more stress on consumers if we look at credit card delinquencies if we look at the percentage of those that are giving minimum payments in terms of servicing their credit card debt. Those all suggest that stress is increasing,” Hooper said. 

 According to recent data, the delinquency rate on credit card loans at commercial banks stood at 3.10% at the end of Q4 2023, up from 2.27% at the end of Q4 2022, reflecting broader economic pressures particularly affecting younger borrowers.

In the meantime,  the Personal Consumption Expenditures (PCE) price index showed an annual increase of 3.7% in the first quarter, significantly above the Fed’s 2% target.

“The reality is that in the recent inflation data we’ve seen, and this has been a few months now, has not been a great trend,” Hooper told Kitco News.

When discussing the potential for Federal Reserve policy changes, Hooper expressed cautious optimism. “It’s far more realistic to say there’s a real possibility of a July rate cut. I still hold out hope, a lot of hope for that,” she said. 

On why Hooper still thinks the Fed could cut rates as soon as July, watch the video above. 

Hooper’s view is in contradiction to the overall market sentiment, which now sees the first rate cut only in December, according to the CME FedWatch Tool. 

For a comprehensive understanding of these complex dynamics and more, ensure to watch the full interview with Kristina Hooper on Kitco News above.