Traders work on the floor of the New York Stock Exchange during morning trading on April 03, 2025 in New York City.
Michael M. Santiago | Getty Images
Traders are now betting the Federal Reserve will cut at least four times this year, amid fears Trump’s tariffs could tip the U.S. into a recession.
Odds of five quarter-point cuts coming this year jumped to 37.9%, up from 18.3% one day prior, according to data from the CME Group on Friday morning. That would put the federal funds rate to 3.00% to 3.25%, down from 4.25% to 4.50% where it has been since December.
Markets are also pricing in a roughly 32% chance the federal funds rate will fall to 3.25% to 3.50%, which would mean four quarter-point cuts from the Fed.
At the same time, the likelihood of a half-percentage point cut coming in June also jumped, to 43.8% from 15.9% previously.
The implied odds the Federal Reserve will cut aggressively rose, after Trump’s tariffs raised fears of a global trade war, and hurt economists’ forecasts for both growth and inflation. Investors are expecting that a slowdown in economic growth could spur the Fed to lower rates in a bid to avoid a recession.
However, many worry the Fed has a tough road ahead of them, as the central bank would have to cut rates in an environment where inflation has yet to go down to its 2% target. If implemented, the tariffs are expected to drive core inflation north of 3%, possibly even as high as 5% according to some forecasts.
On Friday, Roger W. Ferguson, economist and former Fed vice chair, told CNBC the Fed may not cut at all this year, saying the central bank has to worry about the inflation part of its mandate.
— CNBC’s Jeff Cox contributed to this report.
Get Your Ticket to Pro LIVE
Join us at the New York Stock Exchange!|
Uncertain markets? Gain an edge with CNBC Pro LIVE, an exclusive, inaugural event at the historic New York Stock Exchange. In today’s dynamic financial landscape, access to expert insights is paramount. As a CNBC Pro subscriber, we invite you to join us for our first exclusive, in-person CNBC Pro LIVE event at the iconic NYSE on Thursday, June 12.
Join interactive Pro clinics led by our Pros Carter Worth, Dan Niles, and Dan Ives, with a special edition of Pro Talks with Tom Lee. You’ll also get the opportunity to network with CNBC experts, talent and other Pro subscribers during an exciting cocktail hour on the legendary trading floor. Tickets are limited!
