Fed Rate Cuts to 2023 but Are Still Escaled

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Fed Rate Cuts to 2023 but Are Still Escaled

Bloomberg Federal Reserve officials keep repeating the mantra that they don't plan to cut interest rates next year. Eurodollar futures showed decreased expectations for Fed interest-rate cuts in 2023 but still price in around a quarter-point move and at least two more in 2024, according to the eurodollar futures. Federal Reserve Bank of San Francisco President Mary Daly and Fed Atlanta President Raphael Bostic banged on the drum on the need to keep tightening in place to reduce inflation that remains near a four-decade high.

After the Fed hawkish meeting last month, a series of global economic and geopolitical shocks have reinforced deep concerns that the US and other major economies will fall into recession. Traders temporarily erased bets on 2023 cuts, but deep concerns have been reinforced by a series of economic and geopolitical shocks. As much as Fed Chair Jerome Powell insists that the lessons of the 1980s show the need to focus on inflation and not growth, investors refuse to believe that he will remain steadfast in the face of a severe downturn.

Su-Lin Ong, head of Australian economic and fixed-income strategy at Royal Bank of Canada, said Fed officials' constant push back against rate cuts may reflect a desire to not hint at any loosening in financial conditions. If they stay that determined and move into very restrictive territory, as the dot plots would suggest, a US recession is likely and a reversal of policy will likely be needed at some point. Facebook is not the only game in town for digital political ads.