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Is the Fed setting the stage for a lower normal rate horizon?
Currently, the Fed is saying one thing, but the market is trading on something else. Recent official rhetoric expects a rate increase sometime this year, but the U.S yield curve is not pricing that in at the moment. In fact, the first full +25bp increase is not priced in for another 12-months. Will we get clarity from Ms. Yellen at Jackson Hole this Friday? Maybe not, but a Fed policy change may be in the making. In contrast to the somewhat hawkish near-term guidance, the Fed’s discussion of the longer-term funds rate outlook is somewhat subdued. Do not be surprised that in next month’s “dot plot” guide, a ... (full story)