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Published: Dec 26, 2023 7 min read

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Everyone has been following the Federal Reserve’s moves for the past two years, wondering what the central bank will do next with interest rates. While it now looks like the long stretch of rate hikes is finished or close to it, the new question is: When will the Fed begin to cut interest rates?

The central bank has the liberty to change the federal funds rate at will. That’s the interest rate at which banks can borrow or lend to one another overnight. Raising this rate allows the Fed to shrink the amount of money available and make it more expensive to borrow. It can essentially wield this rate to slow down or speed up the economy like a pressure valve.

In 2020, for example, the Fed lowered this rate to 0% to encourage spending and stimulate the economy after the pandemic slowdown. In March 2022, with inflation rising to almost 9%, it began to hike interest rates to make it more pricey to borrow, with the hopes of cooling the economy and slowing down runaway price increases on a wide range of goods and services.

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The inflation rate is now around 3%, close to the Fed’s target rate of 2%, but interest rates remain high. Rate cuts are expected, but there is little consensus about exactly when they'll come. In real estate, the rate cuts would translate to lower mortgage rates for homebuyers and more incentive for owners to sell, thereby boosting the inventory of homes on the market. More broadly, businesses would find it cheaper to borrow too, allowing them to increase their spending and ultimately leading the price of stocks upward.

The Fed is vague about when it will begin to cut rates; in fact, it hasn’t even officially announced the end to its hikes yet. As it stands now, the Fed has paused rates at about 5.25%. So, when can we expect interest rates to start dropping? Here’s what some experts are saying.

Prediction: Fed interest rate cuts coming in early 2024

Conor Sen, founder of Peachtree Creek Investments

In a column for Bloomberg, Peachtree Creek Investments founder Conor Sen argued that cutting rates in the first half of 2024 will help the Fed “preserve the [economic] expansion” that it led when it began hiking rates. He evidenced the claim by saying that since the Fed released its economic projections in September, inflation and unemployment figures have slowed more than expected, giving credence to the possibility of rate cuts sooner rather than later. He predicts interest rate cuts as early as March.


Investment bank UBS predicts rate cuts in the near future, but it also predicts a sizable economic downturn at the same time. The bank’s note earlier in the month said that it expects rate cuts to begin in March, and it expects the Fed to cut interest rates by a whopping 275 basis points, or 2.75%.

The bank expects these cuts to come in March because it expects the U.S. economy to fall into a recession at some point in the second quarter. It reasoned that the timing of these cuts would help the Fed to get ahead of the turbulence.

Bill Ackman, founder of Pershing Square Capital Management

Earlier this week, billionaire investor Bill Ackman told Bloomberg that he expects the Fed to cut rates in the first quarter of 2024. Ackman’s argument is that with inflation going down, but rates staying raised, the real rate of interest is getting higher still. Without cutting the federal fund rate, Ackman says he sees “a real risk of a hard landing” — a fast change of pace in economic growth that causes a recession — in 2024.

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Prediction: Interest rate cuts are still a ways off

Sam Millette, director at Commonwealth Financial Network

Sam Millette of financial advising company Commonwealth Financial Network tells Money that the futures markets have priced in an initial rate cut as early as May 2024. However Millette says that he believes that "the May estimate is likely to prove to be too early, and a first cut in the second half of the year is more probable." He estimates that the first rate cuts will come after the Fed's July or September meeting, so long as we continue to see "signs of slowing growth and moderating inflation" in the first half of 2024.

Bill Adams, chief economist at Comerica Bank

Comerica Bank economist Bill Adams tells Money in an email comment that evidence of a pivot toward interest rate cuts is mounting. He points mainly to a slowdown of new jobs and the 0.2% month-over-month rise of the personal consumption expenditures as evidence (PCE is one of the Fed's favorite gauges of inflation); October's PCE growth is the slowest since March 2021.

Taking these factors into account, Adams says Comerica expects a first rate cut of 25 basis points in June of 2024, and "a cumulative 0.75 percentage point in rate cuts over the course of 2024."

Raphael Bostic, president of the Atlanta Federal Reserve

Fed officials have opinions on when rates will be cut too, and Atlanta Fed president Raphael Bostic told CNBC in late October that he expects rates to stay elevated until at least late next year.

“There’s still a lot of momentum in the economy,” Bostic said. “My outlook says that inflation is going to come down but it’s not going to like fall off a cliff.”

Bostic’s reasoning is that the economy is still a ways off from the Fed’s 2% inflation target, and it will take until at least halfway through next year to be primed for cuts. It’s worth noting that Bostic will be a voting member of the Fed’s Open Market Committee, the body that adjusts interest rates, next year.

More from Money:

Why High Interest Rates Are Good News for Long-Term Care Insurance

Why Fed Rate Hikes May Be on Hold for the Rest of 2023

Here’s How Far Home Prices and Mortgage Rates Could Drop in 2024

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