economy fed fomc Trump

Hallelujah: Market Forecasts Converge With Fed Outlook

In case you haven't noticed by now, Trump's election and subsequent nod to fiscal stimulus in his acceptance speech have ignited the previously illusory "reflation" trade. Suddenly, the Fed's outlook for rates doesn't look so unrealistic. Indeed, the vastly improved outlook for growth and inflation under Trump has the market betting on a much more hawkish Fed, even as the pessimists among us might be inclined to believe that the new president will be unable to pass stimulus measures through Congress in time to avert a recession, meaning that ultimately, fiscal stimulus will need to be funded with helicopter money and concurrent low (or even negative) rates. On Monday, Deutsche's Joseph LaVorgna is out with a look at 4Y1Y OIS rates on the way to showing that market expectations have rapidly converged on Fed forecasts - and that, if you're the FOMC anyway - is a good thing... The markets' expectations of the longer-run funds rate have converged to the Fed's forecasts. And when the Fed raises rates, it is unlikely to lower its median longer-run "dot". This has hardly been the case, as the Fed has revised its forecast of the longer-run or "neutral" rate substantially downwards. For e
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1 comment on “Hallelujah: Market Forecasts Converge With Fed Outlook

  1. Anonymous says:

    Always love hearing from Joe “the forehead” I’mBoringYa…

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