AFMC - Fed Preview: On The Golden Path Toward Cuts

2024-01-29 16:41:45 ET

Summary

• Treasury rate volatility hits fresh lows, indicating light action expected after Fed interest rate decision.
• Inflation trends favor the FOMC cutting rates sooner rather than later, but some economists warn of potential inflation risks.
• I expect the first ease coming in March, but there are several key economic reports to sway that view in the near-term.
• Goldman Sachs forecasts five quarter-point rate cuts in 2024, aligning with a Goldilocks economic outcome while risks remain of re-emerging inflation.

Treasury rate volatility, as measured by the ICE BofA MOVE Index ((MOVE)), settled last week at fresh lows dating back to September 2023. That’s indicative of light action expected after Wednesday’s Fed interest rate decision. Indeed, the market widely expects no change to the Effective Fed Funds target rate, currently in the 5.25% to 5.5% range....

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