I currently assign a 45% probability to rates remaining unchanged, a 35% probability to hikes by year-end or early 2027, and a 20% probability to cuts.<\/p>\n\n\n\n
The key driver of this shift is rising upside risk to inflation. Since early May, the Iran conflict has persisted longer than expected, the oil futures curve has moved higher, US growth data have remained resilient, and signs of pipeline inflation from China have strengthened. Together, these developments increase the risk that higher energy and import costs feed into broader consumer inflation.<\/p>\n\n\n\n
Where I differ from consensus is that I believe markets may still be underestimating the possibility of additional tightening. The Fed can generally look through a temporary energy shock, but persistent oil and import-price pressures risk affecting inflation expectations, wage dynamics, and firms\u2019 pricing behaviour, particularly against a backdrop of resilient demand, AI-related capex, and firm labour income. Conversely, if geopolitical tensions ease quickly and oil prices reverse lower, cuts could return to the outlook. For now, I remain more concerned about upside inflation risks than downside growth risks.<\/p>\n","protected":false},"excerpt":{"rendered":"
My modal view has shifted to no change in the fed funds rate over the next 12 months, although I view the distribution of outcomes as increasingly binary.<\/p>\n","protected":false},"author":5,"featured_media":1439050,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ngg_post_thumbnail":0,"footnotes":""},"categories":[220],"tags":[],"class_list":["post-1445737","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-opinion-leaders-en"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.payoff.ch\/en\/wp-json\/wp\/v2\/posts\/1445737","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.payoff.ch\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.payoff.ch\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.payoff.ch\/en\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/www.payoff.ch\/en\/wp-json\/wp\/v2\/comments?post=1445737"}],"version-history":[{"count":1,"href":"https:\/\/www.payoff.ch\/en\/wp-json\/wp\/v2\/posts\/1445737\/revisions"}],"predecessor-version":[{"id":1445738,"href":"https:\/\/www.payoff.ch\/en\/wp-json\/wp\/v2\/posts\/1445737\/revisions\/1445738"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.payoff.ch\/en\/wp-json\/wp\/v2\/media\/1439050"}],"wp:attachment":[{"href":"https:\/\/www.payoff.ch\/en\/wp-json\/wp\/v2\/media?parent=1445737"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.payoff.ch\/en\/wp-json\/wp\/v2\/categories?post=1445737"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.payoff.ch\/en\/wp-json\/wp\/v2\/tags?post=1445737"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}