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Traders are increasingly optimistic about the Federal Reserve's potential for interest rate cuts, with markets pricing in over six cuts by March 2025. However, prominent economist Mohamed El-Erian warns that this optimism may be misplaced, suggesting that the market is overestimating the likelihood of aggressive rate reductions. He expressed concerns that the current pricing reflects an expectation of 150 basis points in cuts within a six-month period, which he believes is unwarranted without a significant economic downturn. Analysts caution that such aggressive easing could signal a move towards a hard landing for the economy, potentially affecting riskier asset classes negatively.
