Summary: Bond traders have trimmed their forecasts for Federal Reserve rate cuts in 2024 as higher oil prices raise inflation concerns. Interest-rate swaps tied to Fed meeting dates signaled reduced easing, Treasury yields rose, and President Donald Trump publicly called for the central bank to lower rates without delay.
Market instruments that reflect expected Fed policy moves traded on Thursday at levels implying only 20 basis points of easing by the end of the year, down from roughly 30 basis points late Wednesday. For context, as recently as February 28 those same swaps priced in at least 50 basis points of easing, the equivalent of two quarter-point cuts.
On Thursday President Trump took to social media to criticize Federal Reserve Chairman Jerome Powell, referring to him as Jerome "Too Late" Powell. He questioned Powell’s whereabouts and demanded that the central bank reduce interest rates immediately rather than waiting for the next scheduled meeting.
Investors have been pricing higher yields since the United States attacked Iran on February 28, a move that lifted the risk premium in markets by increasing the chance of elevated oil prices. Market participants sought higher compensation for the risk that a surge in oil will rekindle inflation, dampening expectations that the Fed can move quickly to ease policy.
The Treasury market selloff continued on Thursday, with two-year Treasury yields climbing 10 basis points on the day to reach 3.76%.
Overall, the change in market pricing signals growing uncertainty about the Federal Reserve’s capacity to cut interest rates in the face of inflationary pressure tied to higher energy costs following recent geopolitical events. That uncertainty has had an immediate effect on short-dated government debt and market expectations around monetary policy.
Separately, the nominee President Trump has chosen to lead the Federal Reserve, Kevin Warsh, remains awaiting confirmation by the U.S. Senate.
Note: This article reports the market moves, statements, and facts as they were presented. It does not add new events or interpretive claims beyond those details.