Let’s talk about the Fed rate!
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Let's talk about the Fed rate, because the situation is very interesting now. Most likely, we are already at the peak of the Fed interest rate, and now over the next 6-8 months it will remain at this level, after which it will be reduced. But is it really that simple? Let's share an alternative opinion. Markets expect the Fed to begin cutting interest rates next year, but cutting rates is a two-pronged move as it will signal the health of the overall economy. As inflation falls and the Fed continues to hold off on further rate hikes, investors are raising their expectations for a rate cut in 2024. Markets estimate there is a 95% chance that rates will be below current levels by next December, according to FedWatch. The optimism comes on the back of a lower-than-expected inflation report, with prices across the economy rising 3.2% in October, below the 3.3% expected. However, the rate cut may not be the catalyst that markets are hoping for. That's because any easing from the Fed would likely be in response to a slowing economy, and a truly large rate cut would likely come in the wake of a clear recession. The markets are expecting the Fed's rate cut to trigger a bull market where you and I can take our profits. But a recession is usually a strong obstacle to this. According to UBS, the rate could be cut by 2.75% as the economy approaches recession in the middle of next year. That's about four times the rate cut the market expected, meaning the economy could slow to the point where the Fed finds it necessary to reverse the monetary policy tightening it began in March 2022. Therefore, lowering the interest rate is also a difficult task, and this also needs to be done correctly, without damaging the economy. submitted by /u/readyhostility |
