Fed Funds Forecasts are Futile

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The June 2024 Fed funds futures contract implies that the Fed will cut interest rates only slightly between now and the summer of 2024. If that forecast proves correct, then it’s highly likely the yield curve will remain inverted and/or longer-term yields will rise sharply.

Both will cause economic weakness.

Why? As I wrote in Is this Inversion Different, the shape of the yield curve has a significant influence on bank lending and economic growth. And no, this inversion is not different despite what the media says.