Will the seventh time be the charm? According to Deutsch Bank this is at least the seventh time in this hiking cycle that markets have reacted notably in response to dovish central bank speculation. On the previous six occasions those hopes were dashed.
Fed Funds futures are now suggesting that the overnight rate will come down to 4.46% by the end of 2024. The Fed’s own projections imply fewer cuts with the median rate seen at 5.14% by year end 2024.
Two central bank officials emphasized yesterday that bringing inflation fully down to the 2% goal is their main focus. Fed Bank of Minneapolis President Neel Kashkari said policymakers have yet to win the fight against inflation and they will consider more tightening if needed. His Chicago counterpart Austan Goolsbee said officials do not want to “pre commit” decisions on rates.
Both policy makers suggested the markets have perhaps “gotten ahead of themselves, thinking that policy easing is just around the corner.”
The S & P 500 rose for a seventh straight day—heading toward its longest winning streak since November 2021 according to Bloomberg, the result of the dovish speculation which is perhaps unfounded given Fed statements.
Next week several key inflation indicators are released. Will market sentiment again change?
What will happen today?
Last night the foreign markets were mixed. London was up 0.08%, Paris up 0.18% and Frankfurt down 0.03%. China was down 0.18%, Japan down 0.33% and Hang Seng down 0.58%.
Futures are flat as several central bankers are continuing to push back on the narrative of speedy interest rate cuts, a sentiment that FRB Chari Powell may echo later today. The 10-year is off 3/32 to yield 4.58%.
