The rates picture keeps sending confusing signals: the yield curve continues to be inverted, which is a sign of distress, and contradicts the time value of money, but at least, the whole curve shows positive real interest rates. Second, the SOFR curve is discounting lower rates in the short term (‘24 and ‘25) but higher rates in the long term than the Fed Dot chart. It would appear as if the market expects inflation to be contained in the short term, bottom around 2026, and go back up in 2027 and beyond. The Fed and the CBO (not in the picture), however, expect inflation to be stable at 2% for the foreseeable future. And the bond market does not give a clear indication of what to do next but remains below Fed funds.
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