The bond market took on a very strong position about the Fed in its recent rally—that rate cuts were likely this year in order to stimulate the economy. However, upon the release of the most recent Fed minutes, that view appears to be quite clearly wrong. The Fed minutes show no indication at all of cuts to come this year. Instead, those at the Fed merely indicate that hikes are likely to be put on hold for the rest of the year.
FINSUM: We don’t think there is much of a chance the Fed will cut this year. Recent economic data has been a little better, which means they seem much more likely to stand pat than to cut.