Fed Holds Rates Steady as Economic Resilience Delays Expected Cuts

The Federal Reserve has signaled no immediate plans to cut interest rates in June or July, pushing back against market expectations for early monetary easing. Wall Street banks have swiftly adjusted their forecasts, with most now anticipating the first potential rate cut no sooner than September—and only if economic conditions deteriorate.

Treasury yields jumped as traders scaled back bets on three 2024 rate cuts to just two, with swaps pricing in a more modest 55 basis points of easing versus last week’s 75-basis-point expectation. The policy stance reflects strengthening employment data and persistent inflation pressures, leaving little urgency for cheaper credit.

Risk assets face renewed valuation pressure as the recalibration ripples through bond markets. Two-year Treasury notes bear the brunt of the repricing, with crypto markets likely to see continued correlation to traditional finance volatility in the near term.