Amount of Fed Rate Cuts Priced by End of Year The outlook could change quickly in response to upcoming inflation data or shifts in the economic landscape, but for now, traders are pricing in almost two rate cuts before the end of 2025. Image: Bloomberg
Fed Cuts – Implied by Fed Funds Futures Fewer Fed rate cuts are expected in 2025, but chances of greater easing in 2026 have risen. This reflects caution amid inflation and policy risks, and leaves room for stronger monetary support if economic conditions worsen. Image: Fundstrat Global Advisors, LLC
Interest Rates – Market Pricing for the Number of Fed Rate Cuts Investors should expect only one 25bps Fed rate cut for the remainder of 2025, most likely in September, unless there is a significant deterioration in economic data or a sharp rise in unemployment. Image: The Daily Shot
Energy Prices vs. Fed Rate Cuts Energy prices have historically risen after the Federal Reserve begins cutting interest rates. Image: MarketDesk Research
Average U.S. 10-Year Treasury Yield Performance in Fed Rate Cut Cycles Since 1966, the current Fed easing cycle has resulted in the second-worst performance of 10-year U.S. Treasury bonds. The only period with worse performance was in 1981, during Chairman Paul Volcker’s aggressive measures to combat inflation. Image: Deutsche Bank
Probability of Fed Rate Cut After the CPI data release, traders now estimate an 82.5% chance of a 25 basis point rate cut at the FOMC meeting on December 18, 2024. Image: CME GRoup
Market Pricing of Fed Rate Cuts BofA expects the Fed to cut another 75bp this year, consistent with market pricing, particularly in light of recent economic conditions and the Fed’s recent decision to cut rates by 50bp. Image: BofA Global Research
Number of Trading Days Since Last Fed Rate Cut The Fed’s recent decision to cut interest rates for the first time in four years, in response to changing economic conditions, marks the second-longest wait for such a reduction in history. Image: Morgan Stanley Wealth Management
Fed Rate Cuts Goldman Sachs forecasts a series of 25bp interest rate cuts through mid-2025, aimed at supporting economic growth amid fluctuating inflation rates. Image: Goldman Sachs Global Investment Research
Factor Performance Prior and After the First Fed Rate Cut Historically, the first rate cuts by the Federal Reserve during easing cycles have tended to favor Growth over Value, Small over Large, and Bonds over Stocks. Image: BofA US Equity & Quant Strategy
Small-Cap Stocks Relative Performance vs. Large-Cap Stocks Around the First Fed Rate Cut Small-caps often outperform large-caps in the 6 months following the first Fed rate cut, driven by lower interest rates and a market preference for smaller companies during economic recoveries. Image: BofA US Equity & Quant Strategy