28 November 2023
Market expectations of Federal Reserve rate cuts in early 2024 are at odds with the Fed’s own signals of possible rate hikes to fight inflation. Monetary aggregates like M1 and M2 are decreasing, but total borrowings from the Fed are increasing, indicating that money printing is mainly aiding the banking sector, not the broader economy. This suggests that inflation may not drop as quickly as some anticipate. If the Fed does cut rates, it might be due to a decline in private sector demand, rather than a positive economic sign. Such rate cuts, driven by economic downturns, are unlikely to boost the markets as some expect, pointing to ongoing inflation and economic challenges.