Fed Rate Cut Hopes Fade: Traders Bet on June Delay

Traders Anticipate Fed Delaying Rate Cut Until June, Futures Indicate

Traders are betting that the Federal Reserve will not cut interest rates before June, according to short-term interest rate futures. This suggests that market participants expect the central bank to postpone any rate cuts until later in the year.

This development comes as the Fed has signaled caution in adjusting its policy stance, with Chair Jerome Powell reiterating that there is no need to rush into rate cuts. Traders seem to be aligning with this sentiment, indicating that they anticipate a more patient approach from the Fed in the coming months.

The Fed's start to this year has been in line with where they left off in 2024, and the timing of rate cuts still depends on future data releases. While President Trump has pushed for an immediate rate cut, the Fed may hold off due to inflation concerns. Powell's press conference will offer more clarity on future rate moves.

CME FedWatch data showed that there is a 99.5% probability of the Federal Reserve keeping rates unchanged at the current rate of 4.25% to 4.5%. The Fed started lowering interest rates in late 2024, cutting by 50 basis points in September and again in November and December. More cuts of up to 50 basis points are possible, but will depend on economic slowdown and lower inflation.

Trump's tax policies may boost the economy, but his trade tariffs and immigration restrictions could raise inflation and delay further rate cuts. With inflation still high and the economy doing well, the need for significant cuts is less urgent. Future Fed decisions may also hinge on the labor market and upcoming non-farm payroll data.

Inflation data for January 2025 will be released on February 12 at 8:30 AM ET, and markets will be closely watching, particularly as new AI companies like DeepSeek challenge Nvidia. Inflation, rate cuts, and AI will be key focuses for investors.