Bond investors are on edge as they await the Federal Reserve’s latest interest rate decision due to be announced next week. In addition to Wednesday’s interest rate policy decision, the Fed will also be revealing its updated quarterly forecasts for its policy rate going forward as well as key economic indicators.
With the market largely betting that the Fed will cut rates soon, the main debate among traders at present is whether a rate cut is more likely in June or July. To date, the Fed has been adamant that it is not yet the time to expect rate cuts, resulting in many observers expecting not more than a single decrease.
Although an economic slowdown would likely reduce borrowing costs, Meghan Swiber, rates strategist at Bank of America Corp., believes that an economic slowdown may not be on the agenda.
“The market is positioned for a rally in long duration,” Swiber claimed, adding, “and the ultimate thing that underpins that view is that the Fed is done with the hiking cycle.”