When the Market Stops Believing in Fed Cuts
I think the collapse in Fed cut hopes matters less as a shock headline and more as a reset in how investors price inflation risk. The Fed held rates at 3.50%-3.75% last week and said uncertainty remains elevated while its March projections still point to one cut in 2026. Yet futures pricing shifted so fast that traders effectively priced out cuts this year as rising energy costs and Middle East risk pushed some toward hike scenarios instead. My view is that the market is right to stop assuming easy money but too quick to treat an oil shock as a lasting policy regime. In the short run that pressures rate-sensitive assets and tightens financial conditions. Over the longer term if higher fuel and borrowing costs slow demand the same market that killed cut hopes could bring them back. I’m watching whether inflation stays sticky after the panic fades.