Monetary Policy & Inflation | US
Fed Follows the Taylor Rule Not the Market
- By Dominique Dwor-Frecaut
- 4 min read
Summary
• The Fed expects the end-2024 Fed Funds rate at 2.1%, rising to 2.5% over the longer run. By contrast, markets are pricing 1.8% and 1.7% respectively.
• The Fed’s forecast appears more likely as it aligns with the Taylor rule and previous normalizations.
Market Implications
• The market could be underpricing 2024/2025 hikes.
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