Bond traders' optimism for rate cuts is diminished due to Powell's tough stance

From Yahoo Finance: 2025-05-11 13:55:00

Bond investors are adjusting to Jerome Powell’s stance that the Federal Reserve is not rushing to cut interest rates. Traders are now betting on less than a three-quarter point rate cut in 2025, with the first cut expected in July. The bond market is factoring in higher inflation and uncertainties around trade policies, leading to a shift in rate cut expectations. Some analysts believe the market’s pricing of rate cuts is excessive and expect only a minimal rate cut unless a recession occurs. Treasury yields are rangebound as investors await more clarity on trade policy.

Consumer price index data for April is predicted to rise by 0.3% from March. Economists are closely monitoring the impact of tariffs on inflation and employment. The Fed’s decision to cut rates will depend on various factors, including the trajectory of inflation and economic growth. Market participants are focusing on upcoming economic data releases to gauge the Fed’s future policy moves. Fed officials are scheduled to speak in the coming days, providing further insights into the central bank’s thinking. Auctions for various Treasury bills are also scheduled in the upcoming week.



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