If the Fed cuts interest rates today, it may be the last round of cheaper money until June 2026

Markets price a near-certain 25bp Fed cut to 3.50% today (roughly 90% per CME FedWatch), but FedWatch shows diminishing odds of further easing through early 2026 (Jan 72.2%, Mar 55.8%, Apr 47.6%) with only a 41.9% plurality for a June cut to 3.25%; analysts differ on the path forward (ING forecasts two cuts in 2026, Deutsche Bank one cut in 2026 and 2027, Pantheon 75bp in 2026). Policy outlook is clouded by President Trump’s pledge to replace Chair Powell in May—Kevin Hassett is viewed as the presumptive dovish favorite among contenders—creating political upside risk for further cuts but also uncertainty if inflation remains elevated. Markets were largely in a holding pattern ahead of Powell’s comments, with S&P 500 futures flat, mixed global equity moves, and Bitcoin at roughly $92K.

Analysis

CME FedWatch futures price a near-certain 25bp Fed funds rate cut this afternoon to 3.50% (≈90% probability), leaving market positioning focused on Chair Powell’s post-decision commentary; S&P 500 futures were flat pre-open after the benchmark closed down 0.09%, while European and Asian equities showed modest mixed moves and Bitcoin sat near $92,000. Forward pricing shows diminishing conviction for further easing through early 2026 (Jan 72.2%, Mar 55.8%, Apr 47.6%) with only a 41.9% plurality for a June move to 3.25%, reflecting substantial uncertainty about the path of policy beyond today. Analyst forecasts diverge—ING expects two cuts in 2026 (March and June), Deutsche Bank sees one cut in 2026 and one in 2027, and Pantheon anticipates 75bp of easing in 2026—underscoring model and judgement risk in baseline scenarios. Political risk amplifies that uncertainty: President Trump’s planned replacement of Powell in May (candidates include Kevin Hassett, Kevin Warsh, Christopher Waller, Michelle Bowman and Rick Rieder) could materially shift FOMC bias, and ING highlights the prospect of five of seven governors being Trump appointees by end-2026, increasing regime and signaling risk to markets.

Key Decisions for Investors

• Do not assume further easing beyond today; avoid extending duration or levering into long-term rate bets until Powell’s language and subsequent FedWatch re-pricing confirm a sustained easing path
• Maintain flexible, short-duration rate exposure and use liquid short-dated instruments or options to hedge against political-driven regime changes ahead of the May Fed chair appointment
• Treat today’s cut as largely priced in and expect muted market reaction unless Powell signals a clear new path; keep liquidity and tighten stop-losses on rate-sensitive positions
• Monitor FedWatch probabilities, FOMC communications and incoming inflation data closely as triggers to re-assess positioning, and be prepared to adjust risk exposure rapidly if consensus among market-implied probabilities shifts