Market pricing for the Fed trajectory tends to overshoot.
It was clear in January that rate-cut pricing for 2024 was too aggressive with more than half a dozen quarter-point reductions in the forward curve. At one juncture, a March cut was almost fully priced.
By the time the May FOMC meeting rolled around this week, all but 29bps of what, at the extremes, was nearly 175bps of rate-cut premium, had evaporated into a succession of warm data, a big repricing over a fairly compressed window.
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