According to the Chicago Fed’s National Financial Conditions Index (NFCI), national financial conditions have eased significantly. Financial conditions are looser than when the Fed began its tightening cycle in March 2022, with the NFCI at levels last seen in November 2021.

It is not inconsequential the market has put rate hikes back on the table, albeit with a low probability. However, if risk markets continue to rally, the Fed may be compelled to respond with another rate hike.