Futures point to a 60% chance of the US Federal Reserve easing by a quarter point in December and have just 77 basis points of cuts by late 2025, compared to more than 100 a few weeks ago.
This came on the back of Federal Reserve Chairman Jerome Powell’s comments last week that borrowing costs may remain higher for longer, and on the view that US President-elect Donald Trump’s promoted policies of tariffs, reduced immigration and debt-financed tax cuts would… They fuel inflation, limiting the scope for further policy easing.
Analysts said: “With the ongoing changes in immigration policy, tariff policy, and fiscal policy, Fed officials will act more cautiously in any case in light of the inflationary impact imposed by these policies, and the need to keep real interest rates higher than usual, as a result.” “.
At least seven Fed officials are scheduled to speak this week and traders assume they will sound cautious about aggressive cuts.
The shift in expectations for US interest rates and inflation in turn lifted the dollar, which hit new highs alongside US Treasury yields.
