The Federal Reserve is unlikely to cut interest rates at its policy meeting next week, but if recession fears intensify, a series of rapid rate cuts could begin as early as June, according to institutional analysts.
Market expectations for rate cuts have risen as futures contracts increasingly price in 25 basis point cuts in June, July and October. The trend follows comments from US President Donald Trump over the weekend about a “transition period” as he moves forward with tariffs on multiple countries.
Short-term interest rate traders have moved their estimates that the Fed will begin cutting rates from May to June, but they still predict a total of three cuts in 2025.
U.S. stocks and Treasury yields fell yesterday as concerns grew that Trump's remarks signaled a coming economic downturn.
“Despite the apparent calm, policymakers will become increasingly concerned about the rising risks to dual duty if labor or financial markets start to fall before the Fed has time to assess the impact of tariffs and the entire Trump agenda on inflation,” Tim Duy, chief U.S. economist at SGH Macro Advisors, said in a note. Duy warned that a slow response from the Fed could draw a backlash from the Trump administration, which has been pushing for rate cuts.
*This is not investment advice.
