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A Reuters poll of economists indicates that the Federal Reserve is still expected to cut interest rates in June 2024, despite ongoing inflation risks linked to the war in Ukraine. The survey, conducted among 85 economists, found that 65% anticipate a 25-basis-point rate cut at the June Federal Open Market Committee (FOMC) meeting. This expectation contrasts with earlier forecasts of a pause in rate cuts, reflecting improved economic data and signs of easing inflation. However, some analysts caution that geopolitical tensions and persistent inflation could delay further reductions. The potential rate cut is significant for global markets, particularly for forex traders. A Fed rate cut typically weakens the U.S. dollar (USD), boosting demand for emerging market currencies and commodities. U.S. equity markets may also benefit from lower borrowing costs, which could stimulate corporate spending and consumer confidence. Traders will closely monitor the FOMC minutes and subsequent statements for clues about the Fed’s timeline for future rate adjustments. For Gulf and MENA investors, the USD’s trajectory is critical given the region’s reliance on dollar-denominated assets and oil prices. A weaker USD could lower the cost of oil for import-dependent economies while increasing the value of Gulf sovereign wealth funds’ foreign holdings. Key indicators to watch include U.S. nonfarm payrolls, inflation data, and geopolitical developments in Eastern Europe. The Fed’s balance between inflation control and economic growth will shape market volatility in the coming months.
