Shifting Rate Expectations
Traders and investors alike are rapidly shifting their expectations over the Federal Reserve’s next move amid the crisis of confidence sweeping U.S. banks.
Market pricing appears to be suggesting a significant chance the central bank will not make a change to interest rates in March 2023.
Bets on changes to the Fed’s benchmark rate, were quickly altering Monday. Chances of no change in interest rates after the Federal Open Market Committee’s March. 21-22 meeting were at or around 30%, with peak rates in the current hiking cycle also falling.
It marks a volatile shift over expectations for the direction of interest rates, which are one of the most influential forces affecting demand for stocks.
Higher rates tend to reduce demand for riskier assets such as equities, and the Fed’s aggressive rate hike campaign over the past year in an attempts to rein in high inflation by slowing the economy, has been a major headwind for investors.
Is this now about to change because of the new ‘unexpected’ banking crisis we are experiencing?