Markets underestimating how far the Fed must go to tame inflation?
After the Fed Funds rate reaches its current market-expected peak of 3.39% in February 2023, investors expect the central bank will start cutting interest rates again, which would be tantamount to declaring “victory” over inflation.
But will such a brief stretch of tighter policy be enough to help defeat inflation?
Right now, markets expect that in “real” terms — that is, when adjusted for inflation — the Fed Funds rate won’t reach positive territory at any point during this tightening cycle.
MarketWatch 5 July 2022
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