Interest Rate Cuts Possible by June as Recession Fears Grow

Institutional analysts believe the Federal Reserve is unlikely to reduce interest rates during its upcoming meeting, but if concerns about a recession grow, the central bank might initiate a series of quick rate cuts by June.

Market expectations for rate reductions have intensified as futures markets suggest the Fed could implement cuts of 25 basis points in June, July, and October.

This shift follows recent remarks from former President Donald Trump, who hinted at a “transition period” in his ongoing tariff policies with various nations.

Traders have adjusted their forecasts, now anticipating that rate cuts will begin in June rather than May, though they still expect a total of three cuts in 2025.

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Meanwhile, U.S. stocks and Treasury yields dropped recently amid fears that Trump’s statements pointed to a potential economic slowdown.

Tim Duy, chief U.S. economist at SGH Macro Advisors, highlighted in a recent note that if labor or financial markets begin to weaken before the Fed can evaluate the broader impact of Trump’s policies, policymakers may become increasingly worried about the risks to inflation.

Alexander Stefanov