Top U.S. asset manager Vanguard doesn't believe the Fed will cut interest rates this year

Core Viewpoint - Vanguard does not anticipate any interest rate cuts by the Federal Reserve in 2024, contrasting with the Fed's expectation of three rate cuts by the end of the year [1][2]. Group 1: Federal Reserve's Current Stance - The Federal Reserve has maintained interest rates unchanged for the fifth consecutive time, keeping the benchmark overnight borrowing rate between 5.25%-5.5% [1]. - The Fed still expects three quarter-percentage-point cuts by the end of the year, which has led to a market rally in the U.S. and Europe [1]. Group 2: Market Reactions - Following the Fed's announcement, all three major U.S. stock market indexes closed at record highs, and the pan-European Stoxx 600 reached a new record high [1]. - Traders are currently pricing in a 68% chance of the first Fed rate cut occurring in June [1]. Group 3: Vanguard's Perspective - Vanguard's base case suggests no rate cuts in 2024, which could impact central banks and markets globally [2]. - The number of anticipated rate cuts has decreased from seven at the beginning of the year to three, indicating a shift in market expectations [2]. - Vanguard believes that if the economy remains strong, particularly with supply-side driven growth, the stock market may continue to rally; however, it also views the U.S. equity market as relatively overvalued at this stage [2].