As the end of the year approaches, the US stock market, lacking fresh hot topics, is repeatedly entangled between "aggressive bets on the Federal Reserve's interest rate cut in the spring of next year" and "concerns about whether the aggressive bet on interest rate cuts is excessive".
According to a survey of over a hundred economists released on Wednesday, slightly over half of them still believe that the historic moment for the Federal Reserve to initiate interest rate cuts is at least 8 months later (FOMC in July next year).
Previously: Market Aggressive Bets on Rapid Interest Rate Reduction by the Federal Reserve
According to the schedule, the Federal Reserve will hold a total of 8 FOMC meetings in January, March, May, June, July, September, November, and December 2024. The current target range for the federal funds rate is 5.25% -5.50%.
According to the data from the Federal Reserve Watch tool, the probability of the Federal Reserve interest rate falling at 3.75% -4% and 4% -4.25% by the end of next year is 26.8% and 31%, respectively. That is to say, the market is more inclined to believe that the Federal Reserve will cut interest rates by 125-150 basis points in 2024.
From the current market's bet on the "first interest rate cut time", the probability of it occurring in March next year is slightly over 50%, but the probability of "at least 25 basis points of interest rate cut in May" has reached 86.5%.
Economists do not believe that "interest rate cuts are coming soon"
According to a survey conducted from December 1st to 6th this year, although all but 5 out of 102 surveyed economists believe that the Federal Reserve's current rate hike cycle has ended, slightly over half of them believe that the Fed's first rate cut will be at least until July next year.
Another data makes it easier to discern a tendency towards caution. Out of 102 people, 72 believe that the overall rate cut next year will not exceed 100 basis points, similar in effect to a 25 basis point rate cut starting from the FOMC in July.
Andrew Hollenhorst, chief American economist of Citigroup, interpreted that everyone agreed that the Federal Reserve would cut interest rates from 2024, but the market was underestimating that stubborn inflation would delay interest rate cuts until economic activities slowed down more clearly.
Hollenhurst also provided his scenario deduction: as core inflation strengthens in the coming months, the market's description of a decline in inflation will be shattered. Even if the previous prediction did not occur, that inflation continues to remain moderate, as long as economic activity remains stable, the Federal Reserve may take this opportunity to enhance their credibility and wait for stronger evidence that inflation has continued to slow down.
It is worth mentioning that some economists have also answered questions about the addition of real interest rates, with two-thirds of them believing that the reason for the first Fed rate cut will be the rise in real interest rates (policy rates inflation), rather than the desire of US monetary policy makers to stimulate the economy.