MarketMoodz
Wall Street Eyes 2–3 Fed Rate Cuts This Year
Wall Street traders are pricing in two to three 25-basis-point cuts by year-end, even as the Fed reportedly held the federal funds rate at 3.5%-3.75% in January. Powell signaled a data-driven path and an improving growth outlook, while futures traders and bank analysts map scenarios with two to three cuts this year.
Key Takeaways
- CME Group’s FedWatch shows roughly two rate cuts priced by year-end.
- Goldman Sachs, Citigroup, and Barclays model two to three 25-basis-point cuts this year.
- Fed funds rate is described as steady at 3.5%-3.75% with inflation described as somewhat elevated.
- Powell indicated incoming data show an improved growth outlook and labor market stabilization.
- Two vs. three cuts influence portfolio duration, borrowing costs, and equity valuations.
People Involved
- Jerome PowellFederal Reserve Chair
- David MericleGoldman Sachs Group Inc (GS) Chief US Economist
- Andrew HollenhorstCitigroup Inc (C) Chief US Economist
- Marc GiannoniBarclays PLC Chief US Economist
Entities Involved
- Goldman Sachs Group Inc (GS)Investment bank providing macro commentary and forecasts
- Citigroup Inc (C)Global bank providing macro commentary and forecasts
- Barclays PLCGlobal bank providing macro commentary and forecasts
- CME GroupOperator of FedWatch tool tracking futures pricing
MarketMoodz Analysis
For investors, the prospect of two to three rate cuts this year suggests longer duration assets could rally as discount rates fall and growth visibility improves. Expect bond prices to rise and yields to drift lower, with rate-sensitive equities potentially buoyed by a lower discount rate.
The push-pull of data dependency and inflation pressure has framed a cautious, data-driven easing cycle. Historically, small shifts in inflation data or labor-market strength can tilt the pacing of cuts, so portfolios should consider modest duration tilts toward defensives or selective growth exposure rather than aggressive leverage.
Watch for upcoming inflation prints, payrolls, and the Fed’s own communications. If the data stay on a cooler path, two to three cuts could materialize; if inflation proves stickier, the pace may slow or pause.
Source: Original Article
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