The dynamics are not necessarily that straightforward, as the prospect of larger cuts could cause a panicky reaction for risk asset prices, K33 Research analysts noted. “Similar large cuts occurred during the 2001 and 2007 recessions, often signaling heightened recession risks in the U.S,” K33 Research said in a Tuesday report. However, those historical comparisons could be misleading, as real rates are at their peak with inflation coming down over the past months allowing a speedier pace of cuts, the report added. Market participants currently see the fed funds rate as 125 basis points lower by the end of the year.
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