Institutional: Fed dot plot could test market's optimism for rate cuts
Elmar Voelker, senior fixed income analyst at Landesbank Baden-Württemberg (LBBW), said in a report that the Federal Reserve's new interest rate expectations, known as the dot plot, scheduled for next week's meeting, is expected to be unlikely for the latest forecast to keep pace with currently heated expectations for rate cuts. “It seems at least doubtful that forecast adjustments will keep pace with market expectations,” he said. The same is true for the 2025 forecast, and Voelker said the dot plot will likely be “a potential stumbling block to higher bond prices.” Markets have speculated that the Fed could cut rates by a whopping 50 basis points next week, but the bank's most recent forecasts have only hinted at a 25 basis point cut this year.
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