Global Macro Views

Marching towards a rate cut?

Global Macro Views Blog
January 2024

The market anticipates a possible Fed easing cycle in March since the December FOMC meeting. The likelihood of the rate cut initially reaching 90% is now 47%.

Despite the Fed’s confidence in cooling inflation, Global Economist Nick Tocchio questions the timing of the projected upcoming rate cut.

Since the December Federal Open Market Committee (FOMC) meeting, the market has placed high odds on an imminent Federal Reserve (Fed) easing cycle that might kick off as early as March. The chance of the Fed lowering the federal funds rate at its March 20 meeting, as implied by fed funds futures pricing, reached a high of 90% in late-December, and has since been dialed back to 47% at time of writing. US economic data and commentary from Fed officials shifted odds back and forth, but a Fed March cut has been priced as a significant likelihood since December.

Clearly, a cut will likely be the direction of the Fed’s next rate action, but we think the market is getting ahead of itself on timing. While the Fed has greater confidence that inflation is cooling, it is not evident that inflation is truly handled and solidly on track toward its 2% goal. From our perspective, patience from the Fed is warranted, as we believe that the next leg lower in inflation will take longer than market participants anticipate and disappoint expectations for an early pivot as easing is delayed until later in the year. 

Probability of a Rate Cut at the Fed’s March Meeting

as implied by Fed Funds Futures

Marching Towards a Rate Cut


All investments involve risk, including the possible loss of principal. Certain investments have specific or unique risks. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment.

This material has been provided for informational purposes only and should not be construed as investment advice or a recommendation of any particular investment product, strategy, investment manager or account arrangement, and should not serve as a primary basis for investment decisions. Prospective investors should consult a legal, tax or financial professional in order to determine whether any investment product, strategy or service is appropriate for their particular circumstances. This document may not be used for the purpose of an offer or solicitation in any jurisdiction or in any circumstances in which such offer or solicitation is unlawful or not authorized. Views expressed are those of the author stated and do not reflect views of other managers or the firm overall. Views are current as of the date of this publication and subject to change. This information may contain projections or other forward-looking statements regarding future events, targets or expectations, and is only current as of the date indicated. There is no assurance that such events or expectations will be achieved, and actual results may be significantly different from that shown here. The information is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. References to specific securities, asset classes and financial markets are for illustrative purposes only and are not intended to be, and should not be, interpreted as recommendations. Charts are provided for illustrative purposes and are not indicative of the past or future performance of any BNY Mellon product. Some information contained herein has been obtained from third party sources that are believed to be reliable, but the information has not been independently verified. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission.

Indices referred to herein are used for comparative and informational purposes only and have been selected because they are generally considered to be representative of certain markets. Comparisons to indices as benchmarks have limitations because indices have volatility and other material characteristics that may differ from the portfolio, investment or hedge to which they are compared. The providers of the indices referred to herein are not affiliated with Mellon Investments Corporation (MIC), do not endorse, sponsor, sell or promote the investment strategies or products mentioned herein and they make no representation regarding the advisability of investing in the products and strategies described herein. Investors cannot invest directly in an index.