Posted 12/7/2023, 2:39:00 PM
Market Expectations for Rate Cuts Could Backfire on Overly Optimistic Investors
- Markets pricing in rate cuts could delay Fed from actually cutting rates, per Mohamed El-Erian
- Market exuberance loosens financial conditions, possibly forcing Fed to keep policy tight
- The more markets ignore Fed signals, the more likely Fed pivots in way detrimental to markets
- Markets may believe Fed will tolerate 3% inflation rather than 2% target
- Markets have poor track record forecasting Fed pivots; recessionary fears also a factor