Fed’s Uncertainty Mirrors Market Confusion

As inflation has slowed down, the Federal Reserve has cut rates by 100 basis points since the peak in 2022. But what comes next is unclear, given the uncertainty around future economic conditions and inflation, making it difficult for the Fed to predict the next steps. 

There are political risks at play, inconsistencies around inflation data, and questions within the Fed around whether current interest rates are close to the “neutral” rate, which neither stimulates nor restricts economic growth, or not. 

 In response to this uncertainty, Fed Chair Jerome Powell has emphasized the need to move cautiously. But overall the Fed, just like the markets, is uncertain about the future. 

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