Markets are currently pricing in a pause in the Federal Reserve’s interest rate increases next month. A move that will come before the central bank is forecast to cut rates twice before the end of 2023, according to market pricing.
But a new report from rates strategists at Bank of America Global Research out Thursday suggested this pricing means one of two things — either the Fed’s rate hikes aren’t over yet, or cuts will be deeper than markets expect.
“Historically, the market tends to underestimate actual Fed policy ahead of both hiking and cutting cycles: the market often prices too few rate cuts ahead of a cutting cycle and too few hikes ahead of a hiking cycle,” BofA strategists led by Meghan Swiber wrote in a note to clients on Thursday.
Read More : Fed’s Next Move Being Underestimated by Markets, Warns Bank of America