Traders reassess Fed rate cut expectations amid economic strength

In the wake of a robust jobs report, traders are taking a second look at their expectations for Federal Reserve rate cuts. Previously anticipating six or seven cuts in 2024, many believe the Fed may cut rates just once or twice this year.

Some traders even believe the central bank might not cut rates at all.

The change could be a challenge for the stock market, which had been hoping for the economy to slow down just enough for the Fed to lower borrowing costs without causing a recession.

It had a rough week, with the Dow Jones Industrial Average experiencing its worst performance since March 2023.

With inflation showing signs of cooling but still present, investors are awaiting Wednesday’s release of the consumer-price index for further insights.

The borrowing costs remain above 5%. Some Fed officials also indicate that they may hold off on cutting rates further if inflation doesn’t recede.