Posted 2/2/2024, 7:13:00 PM
Markets Bet Fed Risks Policy Mistake with Overly Aggressive Rate Cuts
- Markets are betting the Fed will make a mistake by cutting rates too aggressively this year
- Investors still expect about 6 rate cuts in 2024, suggesting they expect a policy error
- Powell tried to reduce expectations for a March cut, but markets still expect over 100 basis points of cuts in 2024
- The Fed achieved the opposite of what they likely wanted - less expectation of a March cut but still anticipation of aggressive cuts
- BofA analysts think the risk is that the Fed induces financial tightening if they cut too early