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Market Bets Soar That Fed Will Cut Rates To 2% In 2027
Concerns about rising inflation, and the Fed hiking rates to contain it, have reversed rather dramatically. As Bloomberg's Edward Bolingbroke observes, after months of consensus trades that the Fed's easing cycle will end in 2026, traders in US futures and options markets are suddenly piling on bets that the Fed will continue cutting rates well into next year instead of raising them. As shown below, the key spread linked to the SOFR (the Secured Overnight Financing Rate) which track expected Fed policy, have becoming deeply inverted in the past week, a sign that traders are starting to price a more prolonged easing ... (full story)