The writer is president of Queens’ College, Cambridge, and an adviser to Allianz and GramercySomething peculiar is unfolding once again in the relationship between financial markets and the US Federal Reserve.
A disagreement has emerged over the interest rates that the Fed will set in 2024. The more investors disregard the signals emitted by the world’s most influential central bank, the more likely they will find themselves on the losing side of this debate. And the longer this phenomenon persists, the more intriguing the related complexities.
This situation became vividly evident in the lead-up to the current “quiet period” for officials on public comments slated to end on December 13 with the conclusion of the Fed’s policy meeting. In this period marked by dovish interpretations — or selective hearing — by markets of several Federal Reserve speeches, all attention was focused on whether chair Jay Powell’s remarks at the end of that week would push back against the market consensus predicting rate cuts starting in early 2024.