Column: 2023 U.S. rate cut bets appear before hiking even starts

Federal Reserve Chair Jerome Powell is seen delivering remarks on a screen as a trader works on the trading floor at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., December 15, 2021. REUTERS/Andrew Kelly

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ORLANDO, Fla., March 9 (Reuters) – A flattening yield curve and slumping consumer confidence have been warning for months that U.S. recession risks are rising, but the alarm bells are suddenly being amplified by a rare quirk in the interest rate futures market.

In technical terms, the June 2023-December 2023 Eurodollar curve has inverted. In plain English, traders are beginning to price in Federal Reserve interest rate cuts in the second half of next year, before the tightening cycle has even started.

This inversion had previously been seen further out the curve, into 2024. But that was before war in Europe, eye-watering surges in oil, gas, and commodities prices, and…

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