Central Banks and Adjustment of Expectations
Central bankers are trying to temper market expectations for interest rate cuts in 2024. The Federal Reserve and the European Central Bank are emphasizing the need for caution in adjusting to market expectations.
Money Market Expectations:
Money markets still expect a Federal Reserve rate cut by May and the first easing by the European Central Bank is likely by April. Despite central banks' efforts to maintain "restrictive" policy, there is room for a cut in base rates given the disparity between current and long-term "neutral" rates.
Inflationary Pressures and Central Bank Caution:
Central banks remain cautious in the face of inflationary pressures and supply chain disruptions, which may affect their decisions. Market participants expect the European Central Bank to respond to weak growth in the euro area by cutting rates in April and easing further this year.
I'm curious to see what percentages we will or will not see in the near term, what do you think?