Fed Speakers Push Back on Market Expectations for Rate Cuts, But Limited Impact So Far on Pricing
• Citi economists note Fed speakers saying markets overreacted to recent Fed communications, driving big stock and bond rallies • Markets are pricing in around 150bps of cuts in the next year, more than the 75bps median forecast by FOMC • Fed rhetoric having limited impact on market pricing, even after dovish Powell comments • Citi says Powell focused on avoiding keeping rates high for long, maintaining priced-in cuts • Citi base case is cuts start after March, but timing depends on data and officials adjusting market expectations