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Traders boost bets on June start to Fed rate cuts as Trump puts on new tariffs

BY Reuters | ECONOMIC | 04/02/25 04:47 PM EDT

(Reuters) - Traders boosted bets the Federal Reserve will start cutting interest rates in June and deliver a total of three quarter-point reductions to the policy rate by October, as U.S. President Donald Trump announced new tariffs on imports, which economists say could boost inflation but could also slow the economy.

Short-term interest-rate futures now reflect about a 70% chance of a Fed rate cut when the U.S central bank meets in June, up from about 60% before the tariffs were announced.

Before the announcement the contracts showed traders felt the Fed would deliver a total of three rate cuts by December.?

(Reporting by Ann Saphir; Editing by Chris Reese)

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In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

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