“The combination of collapsing consumer sentiment, unexpectedly intense price pressures and expectations of Fed activism are conspiring to create a particularly toxic cocktail for risky assets,” said Rabobank strategists including Richard McGuire. The yield curve inversion “resonates with the notion that the need to tackle elevated price pressures will see the Fed tip the economy into recession.”
That view is consistent with expectations that the Fed will need to loosen policy again within two years. The market is already positioning for policy makers to respond to the looming slowdown with future rate cuts, pricing two quarter-points of easing by the middle of 2024.
This article was provided by Bloomberg News.