What Goes Up Must (Eventually) Come Down : When Are Interest Rates Expected To Drop?

Key takeaways

• The Fed hiked interest rates ten consecutive times since March 2022 in an effort to slow inflation
• Another hike is anticipated in July, and it might not be the last
• 2024 could be the earliest we start to see interest rates come down

In June, the Federal Reserve paused its spate of interest rate hikes, but another rate increase is expected in July. On Monday, several U.S. central bank officials said that the end of this current rate hiking cycle is “getting close,” which is about as unspecific as it gets.

One thing we know for sure? Q.ai eliminates the guesswork of picking the right assets to fight off inflationary pressures. The Q.ai Inflation Protection Kit hedges against inflation while gaining in value.

Download Q.ai today for access to AI-powered investment strategies.

What’s the latest on the Fed?

​​The Fed’s key interest rate is at about 5.1%, the highest level in 16 years, and the CME FedWatch tool currently puts the likelihood of another interest rate hike at 94%.

There are concerns that if rates are lifted too much, the economy might experience a major slowdown. Some analysts predicted that interest rates would stabilize after the collapse of Silicon Valley Bank and First Republic this year, but that doesn’t seem to be how things will play out, which means more pressure on the banks.

With about 80% of all bank loans for commercial properties coming from regional banks, the commercial real estate sector is also feeling the squeeze, especially after substantial pandemic losses and the shift to remote work.

High interest rates, bank pressure, and a weakened commercial real estate sector are typically not good signs for the U.S. economy, but recent data paints a (somewhat) rosier economic picture — one that maybe, eventually, includes lower interest rates.

So, lower interest rates…when?

The U.S. economy added 209,000 jobs last month, according to Labor Department data. The unemployment rate decreased slightly from 3.7% ito 3.6% in June as well.

Treasury Secretary Janet Yellen said on Sunday that a recession is “not completely off the table.” She added: “There is a path to bring inflation down in the context of a healthy labor market and the data that I’ve seen suggests we’re on that path.”

The Fed estimates it will get the key rate down to 4.6% by the end of next year, but isn’t saying anything definitive on cuts. Vanguard currently predicts that the Fed won’t cut rates until mid-2024 based on how things are going. Morningstar expects the Fed to begin cutting rates at the first meeting in February 2024.

But, of course, these are just predictions.

The bottom line

High interest rates aren’t going anywhere this year, and if that’s leaving you a little unsure of exactly how to invest, you’re not alone.

Enter Q.ai’s Inflation Protection Kit. It leverages powerful AI models to forecast the assets most likely to outperform inflation, from TIPS to precious metals and commodities — helping you add inflation protection to your portfolio with a mix of safe assets that are expected to maintain value and appreciate with continued inflation.

Download Q.ai today for access to AI-powered investment strategies.