The U.S. Treasury market is pricing in a 25 basis point Fed rate cut in November and December in line with the median dot plot
On October 8, Felipe Villarroel, a portfolio management partner at TwentyFour Asset Management, said that investor expectations have become more aligned with those of the Federal Reserve over the past few weeks. “The U.S. Treasury market is now pricing in two 25 basis point rate cuts in November and December in line with the median dot plot,” he said in a note. He said the Fed's base case of a soft economic landing (a decline in inflation without harming the economy and the labor market) and growth close to 2% potential would require the neutral rate to be set at around 3%.
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After Walsh's hawkish remarks, Trump said: "Raising interest rates is absurd. Walsh will do what he must do."
On Monday, Trump said he had great respect for Walsh, stating, "He will do what he needs to do," and added, "In my view, we should be paying interest rates far lower than anywhere else in the world. Raising rates is absurd." Following Walsh's hawkish remarks at the Jackson Hole symposium last Friday, market pricing for a rate hike in September rose to about 60%. Barclays now expects the Federal Reserve to raise rates twice more this year, in September and December, whereas previously, Barclays had predicted no further rate hikes this year.
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