Fed Rate Cuts Could Be Deeper Than Expected Once They Begin
• Markets expect 3 Fed interest rate cuts in 2024, but cuts could be deeper than expected once they begin
• Historically the Fed cuts rates aggressively, about 17 times on average per cycle, often when economy is struggling
• Inflation remains sticky near 2% target, making near-term rate cuts unlikely; could happen later in 2023
• Once cuts begin market may be surprised by depth, sparking stock volatility as growth/inflation outlook shifts
• Key factors shaping Fed policy and markets inflation persistence, commodity prices, earnings outlook, election year volatility