Fund Managers Sound Alarm: Fed Behind the Curve

A recent survey of global fund managers by BofA has revealed that a majority believe the Federal Reserve is behind the curve in terms of monetary policy. The September survey, which included 170 panelists managing almost half a trillion dollars in assets under management (AUM), found that a net 25% of respondents thought policy was too stimulative.

This is the highest percentage since September 2022, when the Fed tightened its stance on interest rates. Notably, investors expect a flatter yield curve for the first time in four years, which could lead to a bullish reversal at the front-end and a sharp bear move at the long-end if Kevin Warsh fails to hike rates.

Warsh's decision not to raise rates would likely be seen as wrong-footing markets, with 52% of survey respondents believing he won't hike before the US mid-terms. However, market pricing had already reflected better than 70% odds of a hike at the September FOMC meeting.

Inflation expectations actually slipped in this month's poll, with a narrow majority expecting lower global CPI (Consumer Price Index). This could be attributed to expectations of lower oil prices a year hence.