When will the Federal Reserve cut interest rates?
This is currently the most concerning question for the market. The CME FedWatch Tool shows that the probability of a rate cut at the June 18 meeting is only 8.3%, rising to 34.2% in July, and reaching 51.5% in September. This means the market generally expects that a rate cut could happen as early as September, but the extent is likely to be only 25 basis points, unless the U.S. economy suddenly collapses.
The June 18 meeting is a key turning point, where Powell will release the dot plot, revealing the pace of rate cuts for the year. If the U.S. economy shows a significant downturn in 2025, the Federal Reserve may cut rates more than twice in a year to stimulate economic recovery. However, if the economy performs well, as it is now, with inflationary pressures still present, the Fed may proceed cautiously, cutting rates only 1-2 times for the year, or even less, prioritizing inflation control.
Currently, the U.S. economy appears to be relatively robust, and the probability of a significant rate cut in the short term is low. Friends, keep an eye on the June dot plot and economic data, and be prepared!
