Institutional analysts are suggesting that the Federal Reserve is unlikely to cut interest rates at its upcoming policy meeting, but there could be rapid rate cuts starting in June if recession fears escalate. Market expectations for rate cuts have risen, with futures contracts pricing in 25 basis point cuts in June, July, and October. US President Donald Trump's comments about a "transition period" in relation to tariffs on multiple countries have contributed to these expectations. Short-term interest rate traders have shifted their estimates for the timing of rate cuts from May to June, but still forecast a total of three cuts in 2025. Concerns about an economic downturn led to US stocks and Treasury yields falling. There is a growing concern among policymakers about potential risks, especially if labor or financial markets start to decline before the Fed has a chance to evaluate the impact of tariffs and Trump's agenda on inflation. The slow response of the Fed could lead to backlash from the Trump administration, which has been advocating for rate cuts.



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