Are markets underestimating how far the Fed must go to tame inflation?

Are markets underestimating how far the Fed must go to tame inflation?
·3 min read

The Federal Reserve isn’t even four months into its latest interest-rate -hiking cycle, and yet investors are already pricing in rate cuts as soon as next year, the latest sign that the market is bracing — or perhaps rather hoping — for a swift return to the easy-money monetary policy that helped drive the roaring stock market of the years following the 2008 financial crisis. Deutsche Bank economist Jim Reid pointed out in his latest “Chart of the Day” note sent to the German investment bank’s clients that the Fed funds futures market, a derivatives market that allows investors to place bets on the direction of the Fed’s interest-rate policy, is already anticipating a pivot back toward easy monetary policy at some point next year.