US FOMC Rate Cuts Delayed Until Mid-2027

ANZ Research projects the Federal Reserve will delay interest rate cuts until June 2027, citing a hardening reaction function in response to elevated inflation. The Fed's focus remains on preventing persistent inflation rather than immediate policy easing.

Key Takeaways

• 1.The Fed is now expected to hold interest rates steady until Q2 2027, with the first 25bp cut projected for June 2027.
• 2.The Federal Reserve's reaction function has hardened, prioritizing the 2.0% inflation mandate amid uncertainty regarding energy price shocks.
• 3.The FOMC is internally divided, with 9 of 18 members favoring higher rates by year-end, following upward revisions to inflation forecasts.

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