Since the post-Covid recovery, monetary policy has been the talk of the markets. Central banks, principally the Fed, are at the heart of the financial mechanism. They juggle between the need to combat the erosion of purchasing power and the need to preserve the health of financial markets. It's an arduous task. Successive rate hikes have calmed inflation by reducing consumer demand. Investors are now getting impatient and want the elevator to come back down to kick-start the machine and boost growth.

They expect four rate hikes this year, starting in the spring. But Jerome Powell doesn't see it that way. Last Wednesday, he declared: "I don't think it's likely that the committee will reach a sufficient level of confidence by the March meeting". To put it plainly: not so fast, my friends, there will be rate cuts, but not as long as the economy performs better than expected. The latest US employment figures came out much better than expected. The Fed is therefore trying to calm the prevailing enthusiasm. On Sunday, Powell reiterated his comments on CBS's "60 Minutes", making it clear that the Fed would go for just three rate cuts this year, rather than four, with the first not taking place until the summer.

But investors are turning a deaf ear: they are still counting on a first rate cut in the spring - in May - and the majority believe that rates will fall four to five times by the end of the year. CME's Fedwatch tool reveals that 52.7% of financiers still expect a 25 basis point cut at that point. For the Fed meeting in June, investors are almost unanimous (at 96.6%), with 37.6% expecting the first rate cut at that time, 48.8% targeting a 50 basis point cut and still 10.1% anticipating -75 basis points! Powell's influence with investors seems to be waning, and he has even earned the nickname Paper Tiger from a Bank of America analyst: a tiger who no longer scares anybody.

Drawing by Amandine Victor for MarketScreener