The Federal Reserve's Federal Open Market Committee (FOMC) will convene on June 11-12, 2024, to deliberate on the future of interest rates in the United States ¹. Despite widespread expectations of rate cuts, various factors suggest that interest rate reductions might not occur in June or even later in 2024 ². The following are key reasons why interest rate cuts might not happen:

- *Inflation Still Above Target*: The Fed's primary concern is inflation, which remains above the 2% target. The Consumer Price Index (CPI) and Personal Consumption Expenditures (PCE) show inflation stuck at 3.4% and 2.5-3.0%, respectively ². Until inflation demonstrates a consistent downward trend, the Fed may maintain its cautious stance.

- *Labor Market Resilience*: The labor market has shown remarkable strength, with low unemployment rates (3.9%) and a steady supply of new talent due to high immigration levels ². This resilience may lead the Fed to believe that the economy can withstand higher interest rates.

- *Quantitative Tightening (QT) Program*: The Fed plans to slow down its QT program from June onwards, signaling a cautious optimism that inflation is stabilizing ². This move may indicate a reduced need for rate cuts.

- *Doubts on Rate Cuts' Effectiveness*: The FOMC minutes from May revealed doubts about the effectiveness of rate increases in the current economic scenario ². Some members believe that many consumer mortgages and corporate loans were issued during the low-rate period, making them less responsive to recent monetary policy.

- *No Urgency to Cut Rates*: Fed Governor Christopher Waller stated that he would need to see "several more months of good inflation data" before considering rate cuts ². This sentiment is shared by other committee members, suggesting a lack of urgency to reduce rates.

- *Market Expectations Revised*: Initial expectations of six rate cuts in 2024 have been drastically revised downward, with only one rate cut forecast in November ². The likelihood of rate cuts in June is currently seen as very low (less than 15%) ².

- *Higher-for-Longer Scenario*: Fed officials and economists have hinted at the possibility of higher interest rates for an extended period ³. This scenario would mean that rates might not be cut soon, and any reductions, if they happen, might be fewer and farther between than anticipated.

- *Impact of Higher Rates on Consumer Spending*: Despite the Fed's sharp rate increases, Americans' spending habits have not been significantly affected, as many homeowners and consumers have already locked in low rates ³. This reduced impact may lead the Fed to maintain higher rates for longer.

In conclusion, while the possibility of rate cuts in 2024 cannot be entirely ruled out, the current scenario suggests that interest rate reductions might not occur in June or even later in the year. The Fed's cautious approach, driven by concerns about inflation and the labor market's resilience, may lead to a longer period of higher interest rates ².