El-Erian: The guessing game over the Fed's monetary policy path has confused the market

El-Erian, dean of Queen's College, Cambridge University, said the current guessing game about the path of the Federal Reserve's monetary policy is causing market volatility. U.S. Treasuries have already suffered a sharp sell-off after a strong September non-farm payrolls report caused traders to quickly lower their bets on the Fed's future sharp rate cuts. The decline since Friday pushed the benchmark 2-year and 10-year Treasury yields above 4% for the first time since August. Swap traders now expect an 80% chance that the Fed will cut interest rates by only 25 basis points at its November meeting. The probability of a 50 basis point cut in November has fallen from more than 60% to zero in the past 15 days. El-Erian added that the Fed's communication since 2021 has "amplified" market volatility, even though policy guidance should have the opposite effect. (Jinshi)