Markets Expect Rate Cuts Sooner Than Fed Guidance Amid Inflation Uncertainty
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Debt markets expect the Fed to cut interest rates in spring 2024, but policymakers believe it's premature to discuss rate cuts until inflation further cools.
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Markets currently signal rate hikes are over and give a 90% chance of cuts by May 2024, while equity markets have rallied on peak rate expectations.
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Fed officials emphasize it's too early to discuss rate cuts and rates may need to move higher before easing policy.
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Markets may be more confident than the Fed that inflation will decline based on inflation forecasts.
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There is some agreement rates will ultimately fall in 2024, but markets see cuts coming sooner than Fed guidance unless inflation remains stubbornly high.