Is the Fed Finally Ready to Follow the Bond Market?

December 11, 2023

Is the Fed Finally Ready to Follow the Bond Market? Photo

Throughout 2023, the bond market has repeatedly “jumped the gun” pricing in Federal Reserve (Fed) rate cuts. The most recent shift toward imminent rate cuts has come despite Fed Chair Jerome Powell’s insistence more work is needed to bring inflation back to target.

After Friday’s stronger-than-expected employment report dampened the market’s enthusiasm for imminent rate cuts, investors will be anxiously looking for any signal of easier money on the horizon during this week’s Fed meeting.1 While Powell will likely stick to the script of data dependency and more balanced risks between inflation and economic growth, the Fed’s quarterly dot plot projections will provide a clear gauge of how quickly policymakers are expecting a pivot to lower interest rates. 

This week’s economic releases include a batch of fresh inflation data ahead of the Fed’s rate decision Wednesday afternoon. The New York Fed’s One Year Inflation Expectations is out today, followed by the consumer price index (CPI) on Tuesday and the producer price index (PPI) on Wednesday.2,3 




1CNBC – U.S. payrolls rose 199,000 in November, unemployment rate falls to 3.7%; 12/8/23 – U.S. NY Fed 1-Year Consumer Inflation Expectations; as of 12/11/23

3MarketWatch – U.S. Economic Calendar; as of 12/11/23

Tags: Federal Reserve | Jerome Powell | Interest rates | Economic data | Inflation

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