Rate Cut Bets Surge as Markets Expect Fed Pivot to Support Fading Growth
• Rate cut bets have surged recently, with markets now seeing a March cut as more likely than not to counter slowing growth and falling inflation • Cuts aim to prevent real interest rates from rising too much and hurting the economy as the lagged impact of past hikes hits • Economic strength is expected to fade in late 2023/early 2024 as consumer spending wanes, forcing the Fed to cut rates to support the economy • Despite Powell pushback, rate cut hopes remain as inflation cools further and Fed members entertain eventual easing • The Fed is moving carefully on rates as risks of under- and over-tightening are now more balanced after aggressive hikes