📝 Expect Fed to Delivery 100Bps Of Rate Cuts In 2023: HSBC Strategy

The Fed may cut rates by a full percentage point before the end of the year, and by another 2.0 percentage points next year.

If we see the recession data really crystallizing in the third quarter, we think it’s quite easy to get 100 basis points or more of cuts from the Fed during the final part of 2023. Important to note that there’s an unusual amount of uncertainty about the policy trajectory given how strange this economic cycle has been.

See the ECB's rate peaking at 3.5% in 2023 and delivering around 200 basis points of rate cuts next year. For the BoE, we expect the Bank Rate to reach 4.5% this year and deliver around 250 basis points of rate cuts in 2024. The Fed is likely to cut rates more aggressively.

Markets are still not pricing enough easing. There's not much of a recession-type policy response into interest-rate futures or curve. - HSBC Strategy