Fixed Income Volatility Reverting to Pre-Hike Levels

March 27, 2024 — Strong economic data, particularly inflation readings that have been stickier than expected, resulted in a shift higher in the path of the expected federal funds rate going into the March FOMC decision. As expected, the meeting did not result in any policy shifts, and the median “Fed dots” were similar to December’s outlook, which forecasted three cuts in 2024. Coupled with the continued economic expansion, the Fed’s determination to cut rates was interpreted as dovish by markets, which responded positively and continued to price in a “Goldilocks” environment.