Investors predict the Federal Reserve will cut rates when faced with a slowing economy next year, betting the US central bank is far closer to ending its historic monetary tightening campaign than it has signalled.

Traders in the US government bond market are wagering that the Fed will be forced to cut interest rates twice in the fourth quarter of 2023. This is despite protestations from chair Jay Powell and other top officials this week that the central bank will not reverse course on its plans to keep borrowing costs elevated even as it slows the pace of its interest rate increases.

Treasuries futures markets point to the Fed’s benchmark policy rate peaking in May at 4.9 per cent before falling back to 4.4 per cent by the end of 2023. That implies roughly 0.5 percentage points of cuts.