Pioneer Briefing US Edition

Interest Rate Cut? The Federal Reserve’s Hesitation


Good Morning,

Investors crave capital like fish crave water. And bankers act as gatekeepers of the economy's pond by regulating global liquidity through interest rate adjustments.

When interest rates, and hence the cost of borrowing, are high, capital flows into the economy are scarce. But when interest rates are low, investors are swimming in cash.

Based in Washington, the Federal Reserve (Fed) wields the most powerful tool as the world's largest economy. When it comes to money, it has real price-setting power. In a world where 60 percent of trade is denominated in U.S. dollars, its interest rates influence markets from Tokyo to London to Frankfurt.

Fed Chairman Jerome Powell © imago

Between May 2022 and July 2023, the Fed raised interest rates 11 times, from 0.25 to 5.50 percentage points, in response to soaring inflation. The European Central Bank (ECB) followed suit for the eurozone, albeit later. This currency devaluation prompted action from the gatekeepers.

Christine Lagarde, President of the European Central Bank © dpa

As of now, the floodgates remain closed. In January, Goldman Sachs analyst Joshua Schiffrin predicted four Fed rate cuts for 2024. However, his optimism may have outweighed realism, painting him more as a well-paid dreamer.

Hopes for rapid and multiple rate cuts are fading, and no one believes a rate cut will come in May anymore. According to the CME FedWatch tool, only 16 percent of market participants expect one in June. This stems from the fact that the inflation rate rebounded from 3.2 to 3.5 percent in March — a significant setback.

Eine Infografik mit dem Titel: No Hope for Rapid Interest Rate Cuts

Market participants' interest rate expectations for the next Fed meetings, in percent

Against this backdrop, the ECB opted to leave its key interest rate unchanged this past week.

Whether it will cut rates in June, as the markets hope, remains uncertain. The ECB sees four reasons why the Fed might prolong its tight monetary policy:

#1 Inflation Persists

The current 3.5 percent inflation rate has persisted for three-quarters of a year and has remained just above that level since June 2023. This represents a cumulative 10.5 percent increase in food prices since the currency devaluation began in 2022.

No relief in sight: Rising oil prices since December point to higher gasoline and fuel costs, and OPEC's efforts to curb oil production are keeping prices high.

Electricity is also five percent more expensive than a year ago. And living costs in America and Europe have become more expensive, with rent prices up 5.7 percent year-over-year.

Christopher Waller, a member of the Fed's Board of Governors, is reluctant to open the floodgates prematurely:

Recent data suggest it's prudent to maintain the current restrictive path of interest rates for longer than previously thought.

Eine Infografik mit dem Titel: Stubborn Inflation

Inflation rate in the USA compared to the same month last year, in percent

#2 Robust Labor Market

The Fed aims for maximum employment in addition to price stability. Currently, labor market indicators don't warrant an urgent shift in policy.

The unemployment rate is 3.8 percent, close to full employment. For example, non-farm payrolls added 303,000 jobs in March, beating expectations of 200,000. Additionally, wages rose 4.1 percent year-over-year in March, suggesting continued pressure.

This undermines a key argument of recent months, that assumed weak labor market conditions implied a need for monetary stimulus. Stimulus now could risk overheating the economy.

Eine Infografik mit dem Titel: USA: The Unemployment Rate

Monthly unemployment rate in the USA since December 2014, in percent*

#3 Strong Economy

The U.S. economy is thriving, and no additional stimulus is needed.

U.S. GDP grew 3.1 percent last year. Economists are forecasting growth of about two percent this year. A "soft landing" - avoiding a recession despite rising interest rates - seems achievable for the U.S.

Stock market rally: The S&P 500 Index has been up about 25 percent over the past 12 months, and the MSCI World Index is up almost 21 percent. Germany's DAX index is still up about 15 percent, driven more by Wall Street liquidity than by Germany's sluggish economy. Most DAX shareholders aren't German.

Eine Infografik mit dem Titel: Stock Market: Boom Despite Rising Interest Rates

Performance of the S&P 500, MSCI World and DAX since the beginning of 2023, in percent

#4 Debt Fuels Inflationary Pressures

Expansionary fiscal policies are countering the restrictive monetary policies in Washington and Frankfurt. Even as central banks tighten monetary policy, finance ministers use fiscal leeway to increase the money supply. The U.S. in particular, but also France and Italy, are expanding their budgets.

By 2023, U.S. debt will have risen by $2.65 trillion to $34 trillion. France and Italy also feel unconstrained by stability pacts.

More money in circulation doesn't fight inflation; it fuels it. Professor Thomas Mayer, economist and director of the Flossbach von Storch Research Institute, notes in a recent study:

The fiscal theory of the price level suggests that persistently high net government debt will create persistent inflationary pressures.

Jamie Dimon, CEO of JPMorgan Chase © imago

Jamie Dimon, CEO of JPMorgan Chase, shares this view: The three main drivers of government debt — the conflict with Russia, military tensions in the Middle East and environmental change — are also significant inflationary pressures. He writes in a letter to shareholders:

The substantial annual fiscal spending needed for the green economy, the remilitarization of the world and the restructuring of global trade all contribute to inflation.

The head of the world's largest bank does not expect a rapid cheapening of money but rather medium-term interest rates between two and eight percent.

He advises investors to distrust hopes of a rate reversal and to hedge their investments against a potentially higher rate environment.

Eine Infografik mit dem Titel: Biden: Boom in Credit

US national debt including IMF forecasts up to 2028, in billions of US dollars

The bottom line is that the money gatekeepers in Frankfurt, London and Washington are cautious in this complex situation. They fear rapid interest rate cuts could fuel inflation and overheat stock markets.

Alan Greenspan © dpa

So, they are holding off on any definitive action for now. They are watching, assessing and being ambiguous. The legendary US Federal Reserve Chairman Alan Greenspan's rule of ambiguity applies:

If my statements seem too straightforward, then you must have misunderstood me.

  • World Briefing: In the latest episode, our colleague Chelsea Spieker talks to Sigmar Gabriel about the tense Franco-German relationship, especially in relation to the war in Ukraine.

  • "A turning point for German luxury cars": Massive discounts at Porsche and yet sales figures are falling.

  • Soccer Success Story: Bayer 04 Leverkusen knocked Bayern off their throne and are now the new German champions five match days before the end of the season.

Israeli air defense destroys missiles from Iran. © imago

On Saturday night, Iran fired some 300 missiles and drones at Israel in retaliation for the Israeli attack on the Iranian embassy compound in Damascus, Syria. According to an Israeli army spokesperson, none of the drones or rockets reached Israeli territory. The Iron Dome defense system successfully intercepted the incoming projectiles.

Of the 110 missiles launched, only "a few" made it to Israel, with one lightly hitting the Nevatim air base in the southern part of the country. The Iranian military said yesterday that it had successfully hit all its targets in the attack and considered the matter closed.

International Reaction

The events led to renewed solidarity with Israel:

U.S. President Joe Biden: "Our commitment to Israel's security against threats from Iran and its proxies is unwavering.”

British Prime Minister Rishi Sunak: "Iran has once again shown its determination to sow chaos in its own backyard.”

Olaf Scholz speaks in China on the situation in Israel. © dpa

German Chancellor Olaf Scholz: "(...) We stand closely with Israel and will now discuss everything with our ally."

French President Emmanuel Macron warned that Iran's unprecedented attack threatened to destabilize the region: "France is working with its partners to de-escalate and calls for restraint."

Emmanuel Macron © dpa

Expert analysis

Military expert Carlo Masala also had strong words:

Iran calls for retaliatory strikes as if they were legitimate under international law. There is no such thing as retaliation in international law, only self-defense. And Iran has not been attacked, so it has no right to attack Israel.

Military expert Carlo Masala © imago

Middle East expert Richard Schneider emphasized to T-Online the danger of a further escalation of the conflict:

The worst-case scenario is an Israeli air strike on targets in Iran. Of course, these would be military targets, not civilian ones. The consequences would be incalculable.

Former Foreign Minister Sigmar Gabriel © Anne Hufnagl

In the latest episode of the Pioneer’s World Briefing, our colleague Chelsea Spieker talks with former vice chancellor and foreign minister Sigmar Gabriel about the strained Franco-German relationship, particularly over the war in Ukraine.

Germany and France's approaches to Russia and Ukraine could not be more different. While German Chancellor Olaf Scholz does not want to participate, his French counterpart is deploying ground troops. For Sigmar Gabriel, it is clear which approach is the correct one:

The French approach.

Click here to listen to today’s Pioneer Podcast.

His argument is based on a possible historical parallel, arguing:

Are we facing a situation similar to that of 1938, where Hitler could count on the leniency of European states for too long and felt compelled to project the impression that his opponents in the West were weak? It seems that France is worried about this possibility and says that if Ukraine falls, it will be an invitation for Vladimir Putin to continue. He sees us as weaklings. If we fall apart here, he will do the same in Moldova, Transnistria, the Western Balkans and maybe even Estonia.

Donald Trump © imago

US support for Ukraine could disappear if Donald Trump wins the US election. This is one of the reasons why Europe needs to become more unified:

The defense minister is right when he says we need to reintroduce conscription; we need to become as strong as we were in the Cold War. And we have to show on NATO's eastern border that we cannot be cornered. This is going to be a challenging task.

Listen to excerpts of today's conversation in German on the Pioneer Podcast or the full conversation on the latest episode of the Pioneer’s World Briefing.

Do you prefer to read? Check out Gabriel's cover story – "Europe in the Pre-war Period?"

2024 is the Super Election Year for Europe. With many major political decisions on the line, this year will be pivotal in shaping the future of Europe. And it will not come without its challenges. A flood of disinformation is expected, as artificial intelligence makes it easier than ever to create and spread fake news.

Artificial intelligence: Strategies against fake news in the super election year © The Pioneer / Aaron Wolf

In Slovakia, a deep fake video featuring a fabricated conversation between a journalist and a politician surfaced just days before parliamentary elections. Despite being debunked, the video resurfaced during the recent presidential election.

The hoax spread like wildfire. © Facebook / Screenshot

With more than 60 countries holding elections this year, combating AI-fueled disinformation is paramount.

For years, platforms have positioned themselves as supposedly pure providers of infrastructure; they do not assume any editorial responsibility. Nevertheless, Facebook, Instagram, X and WhatsApp claim to regulate themselves. However, in reality, the rules of the Wild West apply: whoever is stronger is right. And the shots are always fired immediately, questions are usually asked later.

Political players, foreign influencers and individual citizens can - unconsciously or deliberately spread manipulated narratives. With the help of artificial intelligence, it is now even easier to influence political discourse and undermine trust in democratic institutions.

Eine Infografik mit dem Titel: Social media is just as important as radio

Most commonly used media to consume news in the EU, change from 2022 and 2023 in percent

Social media platforms are becoming the place for political discourse, education and information. If this is where the masses are informing themselves, the sources and facts cannot be manipulated. Yet, regulating these platforms proves difficult.

So, how can platforms, politics and society arm themselves against disinformation, which is created and accelerated by artificial intelligence?

Click here to listen to the Pioneer’s Tech Briefing.

In the latest edition of the Pioneer’s Tech Briefing, my colleagues Lena Waltle and Christoph Keese explore what fighting disinformation in Europe’s Super Election Year will look like and what role AI plays in combating and contributing to this issue.

Plus: They talked with Juri Schnöller, political consultant and campaign expert, FDP parliament member Svenja Hahn and Svea Windwehr, Head of the Center for User Rights at the Society for Civil Liberties.

Their Question: From the European regulation of social media platforms to the American approach of a TikTok ban, what really works?

Listen to the Tech Briefing Podcast and read the Tech Briefing Newsletter in German for insights on the impact of AI on democracy, regulatory approaches and the role of social media in political spheres.

Porsche 356 SC © Porsche Switzerland AG

Contrary to CEO Oliver Blume's claim, Porsche offers massive discounts in China. These discounts have become commonplace not only at independent dealerships but also at Porsche showrooms. Customers reported discounts of up to 30 percent to The Pioneer.

Volkswagen CEO Oliver Blume © imago

Despite the discounts, Porsche is selling fewer cars in China, and industry experts predict sales will be just over 60,000 in 2024. Last year, Porsche's sales in China were down 15 percent. Additionally, in the first quarter of 2024, sales plunged another 24 percent, compared with a global decline of four percent. Frank Sieren reports for The Pioneer:

This development means nothing less than a historic turning point for German luxury cars.

China correspondent Frank Sieren has the exact data. He analyzes the reasons for Porsche's slump in sales in China, which lie beyond the Chinese economy (5.2 percent growth in 2023).


Nancy Faeser © dpa
  • Federal Minister of the Interior, Nancy Faeser, travels to Bulgaria: She discusses border security and planned asylum procedures at the EU's external borders with her counterpart, Kalin Stojanov.

  • Quarterly earnings will be published for Goldman Sachs


  • New IMF forecast on global economic development: Continuation of the IMF and World Bank spring meetings in Washington.

  • German Chancellor Olaf Scholz meets President Xi Jinping in China.

  • Quarterly earnings are expected from: Bank of America, JD Sports, Johnson & Johnson, Morgan Stanley, Northern Trust, United Airlines and UnitedHealth.


  • G7 foreign ministers meet in Capri (Italy, U.S., Canada, U.K., Japan, France and Germany). Topic of discussion: conflicts in Ukraine and Gaza.

  • EU summit: Discussions focus on EU competitiveness and relations with Turkey.

  • State Premier Wüst in the USA: His trip will focus on artificial intelligence and development opportunities in the Rhineland region.

NRW Minister President Hendrik Wüst  © imago


  • Start of the trial against AfD politician Björn Höcke for incitement to hatred in Halle (Saale).

  • EU summit - second and final day.

  • Quarterly earnings are expected from: American Airlines, Blackstone, Netflix, Nokia and Taiwan Semiconductor Manufacturing.


  • Conclusion of three-day G7 foreign ministers' meeting in Capri.

  • Release of German producer prices for March.

  • Quarterly earnings will be published for American Express.

Leverkusen fans storm the pitch  © dpa

Success Story: Bayer Leverkusen secured the German championship last night with a 5-0 victory over Werder Bremen, five match days before the end of the season.

Florian Wirtz © imago

Last season, the record champions (33 titles!) could only snag the title on the final matchday. After eleven consecutive years as champions, Bayern Munich must finally concede defeat.

Beer shower for Xabi Alonso © imago

Xabi Alonso's Leverkusen are still unbeaten after 29 games - can they pull off the perfect season?

Wishing you a wonderful start to your week. Stay informed. Stay with me.

Best wishes,

Pioneer Editor, Editor in Chief, The Pioneer
  1. , Pioneer Editor, Editor in Chief, The Pioneer

Editorial Team

Eleanor Cwik, Alexia Ramos Gonsen, Nico Giese & Paulina Metzler

With contributions from Daniel Bayer, Jan Schroeder & Tatiana Laudien

Translation Team

Eleanor Cwik & Alexia Ramos Gonsen

Graphics Team

Julian Sander (Cover Art)


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