The market discount has the funds rate bottoming in the 3% to 3.25% range, and then the forwards have the implied funds rate rising from 2027 onwards. It discounts something of a soft landing, and no need for the funds rate to go deep below neutrality. The rate-cutting expectation is being bullied by President Trump and his administration. Apart from it being an annoying nagging voice in Chair Powell’s ear, the wires are making this out to be a bigger deal than it actually is. It still points to some steepening pressure from the front end ahead. There are some risks. The first comes from the elevated fiscal deficit. ... (full story)