Markets on Edge as Fed Rate Cut Odds Shift Amid Trump Tariff Drama
Economics
Jamie Redman
Markets on Edge as Fed Rate Cut Odds Shift Amid Trump Tariff Drama
Amid the market chaos triggered by U.S. President Donald Trump’s on-again, off-again tariff measures, the probability of a federal funds rate cut has been steadily climbing.
Markets on Edge as Fed Rate Cut Odds Shift Amid Trump Tariff Drama
Trump’s Tariff Whiplash Fuels Rate Speculation Across Futures and Prediction Markets
Trump’s tariff policies have captivated global attention, with every move scrutinized by investors and policymakers alike. Global markets unraveled over the week following his announcement of sweeping tariffs on April 2. But just seven days later, on April 9, he opted to hit pause—excluding China. As equities hit steep declines, Trump took to Truth Social, publicly pressuring Federal Reserve Chair Jerome Powell to lower interest rates.
Markets on Edge as Fed Rate Cut Odds Shift Amid Trump Tariff Drama
CME Fedwatch tool on April 12, 2025.
In a related development, the president of the Boston Federal Reserve told the Financial Times that the central bank would “absolutely” be prepared to intervene if economic conditions required it. Against this backdrop of uncertainty, CME’s Fedwatch tool now places the likelihood of a quarter-point rate cut at 39.8%, while the odds of no change sit at 60.2%. Though the tool is typically reliable, the current split reflects a finely balanced outlook, with a marginal lean toward maintaining the status quo.
On Polymarket, speculators are actively placing bets on the Federal Reserve’s next move ahead of its May 7 meeting. The odds of holding steady sit at 76%, according to the prediction platform, while the chance of a quarter-point cut stands at 21%. As of Sat., April 12, the contract has drawn $20.87 million in total volume. Over on Kalshi, market participants assign a 73% likelihood that the U.S. central bank will leave rates unchanged, with a 20% probability attached to a 25 basis point reduction.
As market participants dissect every signal from Fed policymakers and prediction markets alike, uncertainty hangs over the Federal Reserve’s next move. While probabilities tilt in favor of holding rates steady, fluctuating economic conditions and political pressures suggest the path ahead is far from settled. For now, investors appear poised, betting not only on outcomes—but on the shifting winds that shape them.
How much?
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