Market Volatility Rises Amid Speculation On Fed's Monetary Policy Path

According to Odaily, the President of Queen's College, Cambridge University, Mohamed El-Erian, has stated that the current speculation surrounding the Federal Reserve's monetary policy path is causing market volatility. The U.S. Treasury market has experienced significant sell-offs, driven by a strong September non-farm payroll report that led traders to quickly reduce their bets on substantial future rate cuts by the Federal Reserve. The decline since Friday has pushed the yields on the benchmark 2-year and 10-year U.S. Treasury notes above 4% for the first time since August. Swap traders now estimate an 80% probability that the Federal Reserve will cut rates by only 25 basis points at its November meeting. Over the past 15 days, the likelihood of a 50 basis point rate cut in November has dropped from over 60% to zero. El-Erian added that the Federal Reserve's communication since 2021 has amplified market volatility, even though policy guidance is supposed to have the opposite effect.