Rising inflation expectations could put Fed on shallower rate-cut path
That's the betting reflected in financial markets on Friday, as the widely watched University of Michigan survey showed consumer sentiment plunged in March and consumers saw inflation over the next five years running at 3.9%, the highest reading in more than 30 years. Pricing of short-term interest-rate futures still reflects an expectation for a June start to Fed rate cuts, with likelier than not a total of three quarter-point reductions by the end of the year. But the probability of a third rate cut, in December, has eroded as financial markets digest the dueling implications of worsening consumer confidence, which can portend slower growth, and higher inflation expectations, which can portend higher actual inflation.
