Posted 12/17/2023, 12:00:00 PM
Markets Bet on Fed Rate Cuts in 2024 Despite Lingering Inflation
- Markets have pivoted to expecting Fed rate cuts in 2024 despite low unemployment rate of 3.7% and still elevated inflation.
- Stocks, bonds, interest-rate sensitive assets like utilities and REITs have rallied strongly since late October on expectations of fewer Fed rate hikes.
- Inflation shows signs of cooling while job market remains strong, giving Fed room to cut rates as restraint without crushing economy.
- Fed forecasts 3 rate cuts of 0.75% in 2024 while markets expect over 4 cuts starting as early as March 2024.
- Odds of soft landing have increased but volatility ahead likely as Fed attempts to smoothly transition policy.