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Dovish expectations

On the chart below, you can see how rate expectations have changed during 2023. As you can see, there’s a big difference between March and November. Expectations are indeed volatile and it’s very difficult (and expensive) to make decisions based on them. But one common denominator you find in the 4 lines, is that all of them point to #ratecuts, which is an act of defiance to the “higher for longer” narrative. By the end of next year, the #sofr curve currently discounts almost 100 bps less than today, and it’s not clear these expectations are taking into account the possibility of a recession. Within the next 4 weeks we will hear chairman Powell about the last decision on rates for the year, and the view from that FOMC committee on the economy. Everything points to a more dovish take to monetary policy.


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