I was trying to look into this and to try to understand why the market is pricing in rate cuts at a time when the unemployment number is at an all time low with no inflation.
One theory that fits has nothing to do with the U.S. but a shortage of dollars in the international markets causing havoc in other countries. There are trillions of dollar denominated assets held globally that need to be paid in dollars and by tightening and reducing their balance sheet while every other country is easing, the U.S. is creating an imbalance between local currencies and the U.S. dollar.
The fed is going to see more and more signs of this demand for dollars driving illiquidity and might be forced to lower their rates to accommodate the rest of the world or else spark global currency crises in other countries.
The recent "technical" adjustment to the IOER rate might be a confirmation of this illiquidity and if this theory is right, they'll need to do another IOER rate cut soon because the Fed tightened too much. The federal funds rate right now is actually more of a target rate than anything else, the IOER rate is the actual important rate that is raised or lowered to affect the money supply which means any adjustment to it is more than just a "technical" adjustment.
I'm sure that behind closed doors Europe, Russia and China are criticizing the myopia of the Federal Reserve and arguing for a reduced role of the U.S. dollar as a reserve currency.
That's just one possible plausible theory. You guys really need to be knocked down a peg because I think the hubris of economists is unwarranted, you guys are usually the last people to figure out anything happening in the market. We have an economist in our firm and we mostly ignore him lol.
Oh wow the current economic environment doesn't fit with any of our academic models derived from stuff that happened in the past, guess that means the people managing trillions of dollars are just all stupid people hurr durr.