From Investing.com: 2024-02-06 08:01:00

In early 2023, a bond market rally hinted at a rate cut by the Federal Reserve, only for the Fed to continue raising rates, causing bond prices to drop. Recent estimates for rate cuts have resurfaced, but strong economic data and Fed pushback suggest rate cuts may not be imminent.

Market expectations for a March rate cut faced pushback from Fed officials, citing strong economic indicators as reasons to delay cuts. The market’s confidence in rate cuts was reflected in the 2-year Treasury yield compared to the Fed funds rate, but Fed Chairman Powell emphasized the need for careful consideration.

Minneapolis Federal Reserve President Neel Kashkari suggested that current Fed policy may not be as restrictive as perceived, advocating for patience with rate cuts. Recent data on rising prices adds more uncertainty, with Fed funds futures now predicting a low probability of a March rate hike.

While some see the upcoming election year as a potential catalyst for rate cuts, the timing remains unclear. The Fed is cautious about easing policy prematurely, aiming to balance economic growth with inflation concerns. The market will closely watch upcoming consumer inflation data to gauge future Fed actions.

Concerns of a repeat of 1970s inflation are present, but the Fed aims to prevent a resurgence by monitoring inflation closely. With a focus on upcoming economic data, the bond market remains cautious about embracing a dovish outlook until more clarity is provided.



Read more at Investing.com: Treasury Market Misjudges Timing on First Rate Cut, Again