Since March 2022, the Federal Reserve has hiked interest rates 11 times. However, it seems like in 2024, the Fed is planning to cut the rates.
The reason behind the Fed's decision to hike interest rates was to combat inflation or maintain the value of the dollar. By increasing interest rates, they reduced the money supply in the economy, which in turn lowered the demand for goods and services.
While some critics were worried that the Fed's decision to raise interest rates could cause the economy to crash, that has not happened so far. The most recent economic data shows a decline in inflation.
Despite strong job growth, President Biden has been facing questions about his economic leadership, especially with average prices on goods and services being 20% higher than they were a year ago. When a CBS News White House reporter asked President Biden about the economic outlook for 2024, Biden replied confidently, saying, "All good, take a look."
The Fed wants to reduce the inflation rate from 3.1% to its target of 2%, but it's been a challenge.
"The Fed is very frustrated with inflation; it has not dropped as much as they wanted it to, especially with the 11 interest rate increases, so the biggest fear for the Fed or those of us who manage money is that inflation kind of stagnates," said Sanchez Wealth Management CEO Jon Sanchez.
According to Sanchez, the Fed is signaling three interest rate cuts in 2024, which could create a shallow recession, otherwise known as a soft landing. Sanchez says that the scenario would be manageable for average Americans.
"Essentially, a soft landing is maybe you see a little bit of job loss here and there, you see the economy slowing, corporate earnings beginning to come down. So, just a little bit of weakening in the economy, but nothing to derail the economy," said Sanchez.
Wednesday in Congress, progressive Democrat U.S. Rep. Ro Khanna called on the Fed to cut interest rates immediately to help President Biden's chances ahead of the 2024 election.
"The Fed is supposed to be apolitical, right? They're not supposed to pay attention to what's going on in the White House, but if you take an outlier view, you'll say wait a minute. It would very much behoove the Fed to be aggressive in the interest rate cuts at the beginning of the year to get the consumer excited. Get the consumer to say, oh, Bidenomics does work," said Sanchez.
Check out the Jon Sanchez Show on KOH-AM.
