Last week, a normal day for markets became something extraordinary after the European Central Bank cut interest rates and in the process reversed a 25-year precedent. Since its founding in 1999 – the ECB has never cut interest rates before the U.S Federal Reserve.
The ECB’s break away from its long-standing tradition of historically being the last to move to the first – could potentially mark the beginning of a ‘new era’ for macro traders.
Let’s not underplay it. The ECB caught many by surprise, especially because recent data shows that inflation is still running hotter in the European economy – compared to the U.S and many other G7 countries. That in itself, chips away at any logical justification for the ECB to cut rates first.
Looking ahead, the big question now is:
Will the Federal Reserve Be Next to Cut Interest Rates in 2024?
The answer to that question may come from the hotly anticipated FOMC Monetary Policy Meeting on June 11-12, which will be followed by a press conference chaired by Fed Chair Jerome Powell.
As always, traders will be scrutinizing every word from Jerome Powell for fresh clues into the central banks future monetary policy plans and most importantly, confirmation of when the first rate cut will come.
