At the start of 2023 markets had priced in a terminal rate below the Fed’s projection as well as rate cuts towards H2. After a flurry of economic data pointing towards stubborn inflation markets have adjusted their expectations and quickly repriced their terminal rate expectations in line with the Fed’s projections.
With markets adjusting their expectations stocks suffered their biggest decline in 10 weeks. Today saw PCE data rise 0.6% MoM, triggering a wall street sell off. The Fed’s favoured inflation gauge puts more pressure on the Fed to continue their tightening cycle.