Markets Reduce Rate Cut Expectations After Recent Tariff Changes
Recent market developments have altered investor expectations regarding an interest rate cut by the Federal Reserve in May. Key points include:
- Fed funds futures now show a 16% chance of a 25bps cut in May, down from 45% a week prior.
- Comments from FOMC members influenced these expectations.
- Fed Governor Chris Waller indicated that the inflationary effects of tariffs could be temporary but noted that cuts may occur if economic slowdown is significant.
- Chair Jerome Powell emphasized a “wait-and-see” approach to changing trade policies and inflation impacts due to fluctuating tariff rates.
- Trump criticized the Fed for delayed reactions and called for immediate rate reductions in a recent post.
- Upcoming speeches from Fed officials: Governor Lisa Cook today, Chair Powell on Wednesday, and Governor Michael Barr on Thursday.