Part 2/4:
Expectations of Federal Reserve Rate Cuts
Market expectations are largely anchored on the anticipation that the Federal Reserve will reduce interest rates in 2024. Currently, there is a roughly 22% probability that the Fed will cut rates in the first quarter of 2024. This probability rises sharply to 41% by May, indicating growing confidence among investors that rate cuts could begin soon.
Such expectations are often driven by concerns about economic slowdown, inflation trajectories, and global economic uncertainties, which may prompt the Fed to adopt a more accommodative stance sooner than previously anticipated.