April 24, 2024 (EIRNS)—The Financial Times reported yesterday on what “the markets” now think the Fed is going to do in the coming period. Just a few weeks back, they were betting on 6-7 interest rate cuts this year. Then, as inflation numbers worsened, “the markets” started betting that there would be only 1-2 interest rate cuts this year. Now, FT has reported, “traders have built up bets that the Federal Reserve could raise interest rates again, a once-unthinkable prospect that highlights a shift in market expectations after stronger than expected U.S. economic data and hawkish comments from policymakers. Options markets now suggest a roughly one-in-five chance of a U.S. rate increase within the next 12 months.”
The trend-setter was reportedly former U.S. Treasury Secretary Lawrence Summers, who earlier this month stated the Fed’s next rate move could be upwards. Others are coming on board. “At some point, if the data continues to disappoint, then I think the Fed will have to start re-engaging on hikes,” said Richard Clarida, an economic adviser at the bond-trading giant PIMCO, who was previously vice-chair of Fed. “Last week John Williams, president of the New York Fed, said the current state of the U.S. economy means he does not `feel urgency to cut interest rates,’” FT added. “If the data are telling us that we would need higher interest rates to achieve our goals, then we would obviously want to do that.”
