Posted 12/18/2023, 3:10:00 PM
Fed Risks Fueling Endless Demands for Rate Cuts If It Appeases Markets
- If Fed appeases markets with big rate cuts, it risks having to reverse course later per Mohamed El-Erian
- The more Fed gives in to demands for rate cuts, the more markets will demand even more dovish policy
- Fed validating market expectations for looser policy makes markets demand additional rate cuts
- Markets have rallied on hopes of upcoming rate cuts, pressing Fed for more dovish stance
- Fed signaling rate cuts in 2024 has reinforced market expectations of easier monetary policy