Rate Cut Hopium Alert: IMF Says Fed Only Gets One Trim This Year (At Most)

So the US-Iran situation has been dragging on for what feels like an eternity now, and surprise, surprise—oil markets are throwing a tantrum while TradFi pretends everything is totally fine. Inflation vibes? Absolutely not great. Meanwhile, the crowd at the water cooler is starting to whisper that the Fed might just ghost rate cuts entirely until late 2024, or in an absolute chad move, actually reverse course and hike. Bold move for a central bank that's been hinting at cuts since what, 2023?

Now, the brave souls on CME FedWatch are pricing in some teeny tiny chance of rate hikes happening—which is about as likely as finding a Satoshi-era Bitcoin wallet with funds still in it. Most analysts, however, are still convinced the Fed won't go full bear mode. They're sticking to their favorite script: "data-dependent," which really means "we have no idea what's happening either."

Enter the International Monetary Fund,stage left, to rain on everyone's parade with their annual Article IV consultation on the US economy. Per Bloomberg, these folks are expecting exactly ONE interest rate cut this year—and wouldn't you know it, just ONE more by the end of 2026 too. According to the IMF, policymakers basically have all the flexibility of a wet noodle when it comes to aggressive easing in 2024.

What's got the IMF losing sleep? Mainly inflation doing push-ups thanks to climbing energy prices. They've even laid out a little checklist before any real easing could happen: the labor market would need to start looking相当 sad, and any oil and commodity price action sending inflation expectations to the moon would need to just stop already.

"Further monetary easing would only be possible if inflationary pressures don't increase—no significant deterioration in the labor market and no spike in short-term inflation expectations," the IMF said, probably while sipping decaf and shaking their heads.

Following this absolute mood-killer of a forecast, the US policy rate is expected to land somewhere in the 3.25%-3.5% range by year-end. That's literally just a single, lonely 25 basis point cut from the current 3.5%-3.75% band. The IMF is projecting this "slow and steady loses the race" approach will somehow guide the economy back to full employment and 2% inflation by the first half of 2027. Peak hopium, everyone.

Not financial advice, clearly. DYOR and all that.