Current Market Pricing for Fed Funds Rate Despite initial expectations for significant interest rate cuts in 2024, the market is pricing in the first Fed rate cut at the September 18th meeting. Image: BofA Global Investment Strategy
Implied Fed Funds Target Rate The FOMC’s latest dot plot projects only 25 basis points of rate cuts for 2024, which looks hawkish at first glance. Image: Bloomberg
Fed Funds Rate and Fed Funds Futures Deutsche Bank’s forecast for the fed funds rate remains more hawkish than many mainstream projections, expecting a single rate cut in December 2024, followed by modest reductions in 2025. Image: Deutsche Bank
Fed Funds vs. VIX Given the lag effect of Fed rate hikes on the U.S. economy, should investors expect a near-future rise in the VIX, or is this time different? Image: Deutsche Bank
Fed Funds Rate Expectations Despite the initial anticipation of multiple rate cuts in 2024 as suggested by the Fed’s “dot plot,” the current market sentiment indicates a more reserved outlook, with fewer rate cuts in 2024. Image: BofA Global Investment Strategy
Money Market Fund Assets vs. Fed Funds Target Rate Money market funds often experience outflows 12 months after the initial rate cut. This occurs as investors reallocate their investments and adjust their risk exposure in response to fluctuations in interest rates and market conditions. Image: BofA Global Fund Manager Survey
Interest Rates – Fed Funds Rate Goldman Sachs now expects the Fed to implement three rate cuts in 2024, down from its earlier projection of four rate cuts, in response to elevated inflation data and evolving economic conditions. Image: Goldman Sachs Global Investment Research
Sentiment/VIX Composite vs. Fed Funds During a rate hiking campaign, bullish sentiment tends to increase initially, but ultimately ends badly. Image: Real Investment Advice
Market-Implied Change in Fed Funds Rate The market has significantly reduced its pricing of Fed rate cuts, indicating a change in expectations regarding future monetary policy. Image: Goldman Sachs Global Investment Research
U.S. Fed Funds Target Rate Historically, there have been many instances where interest rate cuts have coincided with significant financial events and have had an impact on the U.S. stock market and the broader economy. Image: BofA Global Investment Strategy