Next week on Wednesday, the FOMC will decide wether they start cuttting rates and begin a new cycle. But there is still a gap between the paths for future rate depending on wether is projected by the Fed or the market. The blue line on the chart below, comes from the Fed Dot plot, it’s published quarterly and will be updated next Wednesday. The orange line is what the market expects. By December, the market expects three cuts, and the Fed, pending an update of the chart, just one. What do we need to see on inflation and unemployment fronts for the blue line to be pushed down? Is it lower inflation or higher unemployment? Is it a market crash? Until now the market has been the one bending the knee and adjusting to the Fed projections. Will this time be different?
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