Both Fed policymakers and investors are operating in a tricky environment: On the one hand, the US economy is still growing, and inflation — though higher than central bankers would prefer — appears to be getting under control. This argues for caution when it comes to further rate cuts.
Traders are ratcheting back wagers on US interest rate cuts as they seek clarity from the US Federal Reserve amid a thicket of economic and political crosscurrents.
Just one week ago, US short-term futures markets reflected expectations for almost three-quarters of a point of rate cuts in 2025, including a reduction as soon as June. Now, in the hours leading up to the Fed’s policy decision and press conference on Wednesday, they are barely pricing in two reductions — and not until the second half of the year.
