Narrow Curve Limits Fed’s Ability to Manage Expectations: ChartBy
When the Federal Reserve raised interest rates last December, overnight index swap pricing was consistent with seven more quarter-percentage point rate hikes from the U.S. central bank over the next five years. Several episodes of market turmoil in 2016 have reduced that number to just three, leaving Fed officials with little ability to shift market expectations should they decide the economy needs more accommodation. This will probably factor into their decision Wednesday, in which they are widely expected to leave rates unchanged.
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