Every 2-3 months, the market prices in either aggressive rate cuts by the Fed or a very hawkish approach to rate cuts.
On January 12, the market was pricing in 7 rate cuts in 2024, and currently, on March 15, only 3 (or even less than 3 - 73.7 bps to be precise). Even recently, there has been a discussion about the possible lack of rate cuts in 2024! And indeed the market has already started to price it in 😊 see Figure 1 (fortunately, the chance of such a scenario is only 1.24%).

Figure 2 shows the probability of cutting rates in 2024 7 times, and Figure 3 shows the probability of cutting rates in 2024 only 3 times.


Figure 4 shows various historical paths of the Fed rate, including the one priced by the market at the epicenter of the regional banks crisis in March 2023.

A generally similar situation occurred in 2006-2007, when we were dealing with a very long pause - its current equivalent would mean the first rate cut only in October 2024 - see Figure 5. In this context, the next projection of the rate path by the FOMC may look interesting, which we will get on March 20. Will the FOMC decide to reduce the projection of rate cuts from 3 to just 2 this year? – see Figure 5 and the end of 2024 median dot.

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