Fed Surprises Markets with Dovish Pivot on Interest Rates As Inflation Cools Faster Than Expected
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Despite market expectations, Fed's shift to a dovish stance on interest rates surprised markets. Markets now expect rate cuts to begin as early as March 2023.
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Rapid pace of disinflation was a key factor in Fed's change of tone. Latest CPI and PPI reports show inflation cooling significantly.
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Fed economic projections forecast multiple 25bps rate cuts through 2026, assuming a soft landing. More cuts expected if recession hits.
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Lagging shelter component still buoying CPI but will drag CPI down as it catches up to falling rents.
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Banks slowing lending and rising delinquencies signal potential economic troubles ahead like job cuts across industries.