March Fed pivot ruled out, May rate cut less likely'

The tight labour market has dashed expectations of interest rate cuts by the US Federal Reserve (Fed) in March as well as May.

The US central bank will start reducing rates in June, says VIKRAM SAHU, global head of equity research at BofA Securities. In an interview with Samie Modak, Sahu says the US elections and Fed pivot will benefit emerging markets (EMs) this year. 

What headwinds and tailwinds are currently impacting global equities?

Our economics team anticipates a mild deceleration in global growth this year, followed by a gradual recovery in 2025.

We believe a hard landing in the US is unlikely as inflation continues to ease, and consumers remain resilient.

We argue that major central banks, including the Fed and the European Central Bank, could commence cutting policy rates in the second half of the calendar year 2024.

A Fed pivot and a resulting easier monetary policy in 2024 could bolster equity markets. Moreover, economies representing over 60 per cent of the global gross domestic product have national elections this year.

Incumbent government policies are likely to be pro-growth, which is positive for markets.

We remain vigilant regarding three risks: ongoing geopolitical conflicts, the potential re-acceleration of inflation in the US, and rising fiscal deficits globally, particularly in the US.