Bond Market vs. Fed: Rate Hikes That May Never Come
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- Reuters reports the US bond market is pricing in rate hikes that the Federal Reserve may never actually deliver
- Bank of America (BofA) forecasts the Fed will implement a series of rate hikes this year to combat inflation, framing the Fed as ready to "bring down the hammer"
Why it matters: When major bank forecasts and bond market signals diverge on Fed action, investors and borrowers face conflicting guidance on the path of interest rates. The 4.1% May PCE inflation print noted in cross-coverage keeps the rate-hike scenario live, meaning the bond market's skepticism could prove costly if the Fed follows through on BofA's prediction.
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