Traders Signal Fed Overshooting Outlook for Interest-Rate Hikes
- Market-implied peak of policy rate is short of Fed’s forecast
- Lift-off is expected in June, with just five hikes to follow
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In one corner of the U.S. rates market, traders have begun to contemplate the possibility of Federal Reserve rate cuts in 2025.
That’s what the eurodollar futures market is predicting, as short-term interest-rate traders are pricing in a substantially lower peak for the Fed’s policy rate than the central bank expects. In other words, they are saying that the U.S. economy can’t cope with the number of rate hikes Fed officials are forecasting.