Federal Reserve officials hint at significant interest rate cuts within 15 months, market bets on a 78% chance of a rate cut in September.
Recently, Federal Reserve decision-makers have sent strong signals, making monetary policy the focal point. In the early hours of June 5, the Federal Reserve report indicated a slight decline in U.S. economic activity, with a “slightly pessimistic and uncertain” outlook. The ADP and ISM services PMI indices released that day were both disappointing, prompting funds to flee U.S. assets, weakening the U.S. stock market and lowering U.S. Treasury yields.
Comments from Federal Reserve officials also conveyed policy signals. On June 2, Chicago Fed President Goolsbee stated that if tariff measures are not aggressive, the policy interest rate is “very likely to be significantly reduced” in the next 15 months; Governor Waller indicated that meeting conditions would support a “good news-style” rate cut later this year. However, both policymakers believe that rising inflation is more pressing than a slowdown in the labor market, which may keep high rates in place longer.
Market expectations for a Federal Reserve rate cut this year are heating up, with CME tools showing a 78% probability of a rate cut during the September meeting or even earlier. The next Federal Reserve meeting is scheduled for June 17-18, with the market expecting rates to remain unchanged in June and July, and possibly restarting rate cuts later.