Here’s why some investors are so optimistic about rate cuts

Wall Street is clearly antsy for the Federal Reserve to begin cutting interest rates. Some think that could happen as soon as March.

Wall Street is clearly antsy for the Federal Reserve to begin cutting interest rates. Some think that could happen as soon as March. But Fed officials aren’t as optimistic, penciling in only three rate cuts this year, which is about half what the market is currently pricing. So why is there such a disconnect? Here’s the bearish case for rate cuts: Central bank officials have staked out a modest stance on cutting rates, likely later than some investors hope, saying there is still much uncertainty over whether inflation will continue to drift toward their 2% target. That’s why they’re leaving the possibility of another rate increase on the table, even though the market rolls its eyes whenever officials make those hawkish comments. “The airport is on the horizon. But landing a plane isn’t easy, especially when the outlook is foggy, and headwinds and tailwinds can affect your course,” Richmond Fed President Thomas Barkin said Wednesday during an event in Raleigh, North Carolina. “The US economy continues to defy expectations.” “That’s why the potential for additional rate hikes remains on the table,” he added.