Trump Urges Powell to Cut Rates Immediately, Bond Traders Lower Fed Rate Cut Expectations

Investing.com - Bond traders have lowered expectations for a rate cut by the Federal Reserve this year, citing rising oil prices fueling inflation concerns, while President Donald Trump publicly calls for an immediate rate cut.

On Thursday, the pricing of interest rate swap trades linked to the Federal Reserve policy meeting date showed only a 20 basis point rate cut expected by the end of the year, down from about 30 basis points later on Wednesday. Just on February 28, the swap market fully priced in at least a 50 basis point cut, equivalent to two 25 basis point reductions.

President Trump criticized Federal Reserve Chair Jerome Powell on social media Thursday, calling him “Jerome ‘Too Late’ Powell.” Trump questioned Powell’s actions and demanded an immediate rate cut, rather than waiting for the next scheduled meeting.

Since the U.S. attack on Iran on February 28, investors have demanded higher yields to compensate for the risk that soaring oil prices could reignite inflation.

Thursday’s government bond sell-off extended further, with the 2-year Treasury yield rising 10 basis points to 3.76% for the day.

The shift in market expectations reflects increasing uncertainty about the Fed’s ability to cut rates amid recent geopolitical events that have driven oil prices higher and sparked inflation pressures.

The Fed chair nominee, Kevin Woor, nominated by Trump, is still awaiting Senate confirmation.

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