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How far will interest rates fall?

Key Takeaways

  • Interest rate cuts are widely anticipated but there has been little discussion around where they’ll eventually end up.
  • The median number for the Federal Reserve’s ‘dot plot’ for the Federal Funds rate is 2.5%.  Markets are pricing in 3.5% long term.
  • In contrast, the Federal Reserve continues to push back against expectations for significant cuts in the near term.
  • Longer term in Europe and the UK, interest rate futures put the terminal rate at 2 and 4% respectively.  In our view the former seems too low and the latter too high.
  • In the week ahead, inflation looks set to be a key determinant of market direction.
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12 February 2024
Steven Bell
Steven Bell
Chief Economist, EMEA
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How far will interest rates fall?

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