Few random thoughts
Post the latest meeting of the US Federal Open Market Committee (FOMC), the market narrative is primarily focused on the following five points – (i) Whether the Fed is done hiking rates or it may hike once more in 2023. A larger section of market participants believes that the Fed may hike another 25bps by the end of 2023 and then pause for 6-9 months before cutting the rates from 4Q2024. Another section is however of the view that the economic conditions are too tight to tolerate another hike. This section believes that the hiking cycle of the Fed may well be over and we may see rate cuts from 2Q2024 itself. (ii) Whether the treasury yields and other lending rates in the US economy will stay “higher for longer”, as forecast by the US Fed, or we shall see a faster decline, as the economic conditions deteriorate. The higher rates have already started to reflect a slowdown in the US housing market. The rate of bankruptcy fili...