SPY - FOMC Minutes Could Provide Markets With A Sobering Reminder Of 'Higher For Longer' | Benzinga
Since the Nov. 1 Federal Reserve policy-setting meeting, market expectations on interest rates have taken a dovish turn. Tuesday’s publication of the minutes from that meeting could provide a sobering reminder that the Fed’s thinking may lag that of the markets.
Following last week’s inflation data that showed consumer and producer price inflation continued to slow, U.S. interest rate markets were pricing a 65% likelihood that the Fed would cut rates by May 2024. Since the end of October, ETFs that track the likely path of interest rates have been moving lower. On Monday, the Global X Interest Rate Hedge ETF (NYSE:RATE) stood at 28, down from a peak of 31.88 on Oct. 19.
Fears are building that economic growth will slow along with corporate profits if the Fed maintains its “higher for longer” stance. There are already signs in purchasing manager index data and other regional U.S. industrial surveys that demand is slowing.
“The near-term risk is that the market has gotten ahead of itself,” said Marc Chandler, chief market strategist at Bannockburn Global Forex.
“The U.S. data are likely to confirm a sharp slowdown at the start of Q4, but the market is pricing in nearly four rate cuts, with around a 75% chance the first one is in May.”
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