Reality bites as Wall Street's rate cut dream disappears
After a long staring contest between Wall Street and the Federal Reserve, investors blinked first
NEW YORK (AP) — After a long staring contest between Wall Street and the Federal Reserve, investors blinked first.
For months, Wall Street doubled down on bets that the Federal Reserve was bluffing about how far it would hike rates. Traders were even forecasting the Fed could begin cutting rates by the second half of this year, which can act like steroids for markets.
Through it all, Fed officials kept saying that they would ultimately raise rates past levels investors were anticipating and leave them there until the fight against inflation was definitely over. They said no rate cuts would likely happen until 2024 at the earliest.
Stakes were high in the standoff because higher rates can stamp out inflation, though at the risk of creating a recession because they slow the economy. Higher rates also hurt investment prices in the meantime.
