Rabobank strategists restated that they expect the Federal Reserve to cut interest rates again this year. This comes as US Treasury yields moved higher amid ongoing inflation concerns.<\/p>\n
The update also covered plans for the next Fed Chair and whether Jerome Powell may stay on the Federal Open Market Committee (FOMC) after his term as Chair ends. If Powell leaves the FOMC, it would create another vacancy.<\/p>\n
The report said the Department of Justice is dropping a criminal investigation linked to Powell and renovations at the Federal Reserve. After this, Tillis withdrew his objection to nominee Warsh receiving a Senate vote.<\/p>\n
Markets are expected to watch on Wednesday for any indication on whether Powell intends to remain on the FOMC. The note added that if a new seat opens up, markets may expect a slightly dovish effect on the FOMC.<\/p>\n
It also stated that, despite progress towards Trump\u2019s preferred candidate for Fed Chair, US Treasury yields rose as attention stayed on inflation risks. It noted there was little concrete news on a Middle East peace deal.<\/p>\n
It remains our view that the Federal Reserve will likely cut rates, but the timing is now in serious question. Persistent inflation is the main obstacle, and the market is adjusting its expectations accordingly. This creates a difficult environment where the direction of policy is clear, but the trigger for it is not.<\/p>\n
Looking back to 2025, we saw how political developments, like the discussions around Chair Powell’s future and potential replacements, added a layer of uncertainty. At that time, the possibility of a new Fed appointment led the market to price in a slightly more dovish outlook. This shows how sensitive rate expectations are to the leadership at the central bank.<\/p>\n
Today, while that specific political situation has resolved, US Treasury yields are ticking higher, reflecting the same inflation fears we saw back then. With recent core Consumer Price Index (CPI) data from early 2026 showing inflation still stubbornly above 3.5%, the market is focused on the data rather than political guidance. This echoes the “higher for longer” sentiment that dominated much of the landscape through 2024.<\/p>\n
For derivative traders, this points toward positioning for continued uncertainty in interest rate futures. Using options strategies on Treasury ETFs can be a way to profit from volatility without betting on a specific direction for rates. The market is very sensitive to each new inflation report, creating opportunities for short-term trades around those data releases.<\/p>\n
Traders should also watch the forward rate agreement market, which is now pricing in a lower chance of a rate cut before the end of summer. This suggests the smart money is betting on the Fed waiting longer than previously hoped. Hedging strategies using interest rate swaps to protect against floating-rate risk seem more important than ever in the weeks ahead.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Rabobank expects another Fed rate cut this year as Treasury yields rise on inflation risks concerns.<\/p>\n","protected":false},"author":103,"featured_media":17025,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-48798","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\n\t\t