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Rates Market Calls Fed’s Bluff After Historical Hawkish Pivot

  • Traders bet more rate hikes next year will end cycle earlier
  • Market expectations for 2024 well below even most dovish dots
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The Fed's Pivot Isn't Strong Enough, Says Summers

Two days after one of the Federal Reserve’s most hawkish pivots in recent years, the rates market is already calling the central bank’s bluff.

While the the median forecast of the Fed’s dot-plot showed that policy makers expect to raise the benchmark rate eight times to 2.125% by end-2024, overnight indexed swaps signal investors are betting that borrowing costs will peak a full year earlier, at about 1.25%. Even the most dovish Fed forecasts for 2024 are 67 basis points higher than what’s priced in the market.