The pause in interest rate hikes by the hawkish Fed this Wednesday has poured cold water on investors who expected rate cuts this year, causing a cooling of expectations for a rate cut by the Fed this year.
After the close of trading in the US stock market, pricing of swap contracts tied to future Fed policy meeting dates showed that traders currently expect the policy rate to rise to about 5.20% in December this year, down about 10 basis points from the peak rate of about 5.30% in September.
At midday on Wednesday, before the Fed announced its decision, pricing of swap contracts showed that investors expected year-end rates to be about 15 basis points lower than the peak rate, implying a greater likelihood of a 25 basis point rate cut. Longer-term contracts predict continued easing next year.
In the economic outlook released after the Fed meeting, Fed officials raised the median expected peak rate for this year by 50 basis points, from 5.1% in March to 5.6%. The dot plot released after the meeting also showed that most, or two-thirds, of Fed officials expect policy rates to be above 5.5% this year.
These forecasts suggest that Fed officials believe that even if they hold steady this week, there will still be two more 25 basis point rate hikes this year.
However, traders have not fully digested the Fed's hint of tightening. Swap contracts related to the Fed meeting period still fully reflect another 25 basis point rate hike by the Fed this year, rather than a total of 50 basis points.
A survey launched by the media after the Fed meeting on Wednesday showed that most investors expect the Fed to continue to raise interest rates, with most expecting interest rate cuts to begin next year.
Of the 223 respondents, 72% believed that the Fed had not yet completed this round of interest rate hikes and that interest rate hikes had not yet ended, while only 28% believed that the Fed's policy rate had peaked.
When asked when the Fed would begin to cut interest rates, 55.6% of respondents believed that it would not be until the second quarter of next year or later, while 34.5% of respondents expected interest rate cuts in the first quarter of next year. 9.9% of respondents expected interest rate cuts in the fourth quarter of this year.
The economic outlook released by the Fed after the meeting showed that Fed officials expect the US to avoid an economic recession this year, and they have also raised their GDP growth expectations for this year by more than double, to 1.0%.
However, the survey showed that 63% of respondents believed that the Fed would cause an economic recession, while 37% of respondents did not expect this to happen.
As for whether the yield on the benchmark 10-year US Treasury bond has peaked this year and whether it will exceed the peak of 4.06% in March in the second half of the year, the views of surveyed investors are almost evenly split, with half believing that it has peaked and half believing that it has not.
Regarding the fluctuation of the US dollar index, nearly 60% of investors believe that by the end of this year, the difference between the US dollar index and its current level will be within 5%, while the remaining investors are evenly split, with half believing that it will rise by more than 5% on the current basis and half believing that it will fall by more than 5%.

According to a media survey, over 70% of investors believe that the rate hike is not over yet, and 90% of investors expect the rate cut to begin next year. About 56% of people think that the rate cut will be in the second quarter of next year or later.

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