Fed Chair Jerome Powell characterized last week’s 25 bps rate cut as a “risk management” decision, dealing a blow to supporters of rapid rate cuts. On Tuesday, Powell stressed that there is “no risk-free path” for interest rates given the risks of a weakening labor market and inflation.
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“Rates are too restrictive, they need to come down,” Treasury Secretary Scott Bessent said in an interview with Fox Business on Wednesday. “I’m a bit surprised that the chair hasn’t signaled that we have a destination before the end of the year of at least 100 to 150 basis points.”
Market Expects Two More Rate Cuts by End of 2025
While Powell has remained firm in his stance of evaluating monetary policy based on incoming economic data, the market still expects two additional rate cuts by the end of the year. CME’s FedWatch tool assigns 77.1% odds of this scenario, down from 81.5% a week ago and up from 37.7% a month ago. The odds of one more rate cut by year-end sit at 21.9%, down from 23.9% a day ago and up from 17.3% a week ago.
That comes as Fed officials are split on where rates are headed, with some pushing for additional cuts to support growth and employment, while others caution that keeping rates higher is necessary to ensure inflation remains under control.
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