Markets Postpone U.S. Interest Rate Cut Expectations to June Amid Mixed Economic Data
Financial markets have adjusted their expectations for the timing of a U.S. interest rate cut, now anticipating a reduction in June instead of May. This shift follows the release of February’s employment data, which showed the addition of 151,000 jobs. While this figure fell short of the projected 159,000, it still exceeds the Federal Reserve Governor Christopher Waller’s target range of 80,000 to 100,000 jobs per month.
Federal Reserve Prefers a Cautious Approach
Federal Reserve Chairman Jerome Powell emphasized that the central bank is in no rush to adjust interest rates, citing uncertainties surrounding President Donald Trump’s economic policies as a key factor influencing this decision.
Speaking at an economic forum in New York, Powell stated: "We are in a good position to wait for more clarity before making any decisions. There is no need to rush." He highlighted that the overall impact of policy changes will ultimately shape the Fed’s monetary policy trajectory.
Trade Policies and Their Market Impact
Trump’s return to the White House has led to rapid economic shifts, including the imposition of tariffs on imports from key trading partners such as Canada, Mexico, and China. These tariffs have already unsettled U.S. financial markets, with economists warning that if they remain in place, they could slow long-term economic growth and drive inflation higher.
Multiple Interest Rate Cuts Expected in 2025
Federal Reserve Governor Christopher Waller has suggested that the central bank could lower interest rates multiple times this year, provided inflation continues to decline.
Waller indicated that the first rate cut is likely in the first half of the year, followed by additional reductions depending on inflation trends and labor market conditions. He noted that if economic data continues to improve, three to four rate cuts of 0.25 percentage points each could be implemented.
However, Waller did not rule out a more conservative approach, stating that if inflation remains persistent, the Fed may limit cuts to just two or even a single reduction.
The Fed's Cautious Stance on Rate Adjustments
During its December meeting, members of the Federal Open Market Committee (FOMC) projected two interest rate cuts in 2025. However, subsequent statements reflected a more cautious approach, reinforcing the ongoing uncertainty surrounding the U.S. economic outlook.
As markets await further economic data, upcoming reports on inflation, employment, and consumer spending will play a crucial role in shaping the Federal Reserve’s policy decisions in the coming months.
