Investors Increase Bets on Aggressive Federal Reserve Rate Cuts
Derivatives markets now indicate a 44% chance that the Federal Reserve will reduce rates at its upcoming meeting on May 6-7, a sharp increase from just 14% a week ago. Current market prices suggest that the Fed is more likely than not to lower its key interest rate to a range of 3.25% to 3.5% or lower by the end of the year, implying at least four quarter-point reductions, based on CME Group data.
Shift in Market Expectations
Just a week ago, market prices indicated a greater than 50% chance of three quarter-point cuts. This shift highlights growing expectations that the Fed may act more swiftly to address the economic challenges posed by the tariff-driven fears of recession.
Powells Cautious Stance on Rate Cuts
Despite market expectations, Fed Chair Jerome Powell stated on Friday that the central bank doesnt feel an urgent need to lower rates. Powells comments reflect concerns that tariffs could drive up inflation, making the Fed more cautious about easing monetary policy too aggressively.
Trumps Call for Rate Cuts
President Trump, however, is urging Powell to take action and cut rates. In a recent Truth Social post, Trump continued to press the central bank to lower interest rates to support economic growth amidst growing recession fears.
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