Fed cut odds fall to 3.6%

Fed-rate odds are one of those market numbers that sound abstract until they suddenly move everything else. Bonds react first. Then stocks, crypto, and the dollar start repricing around a simpler idea — maybe the Fed is not coming to help anytime soon. That is the setup now. After John Williams spoke on May 4, traders pushed the chance of a June 17, 2026 rate cut down to roughly 4%, basically treating a near-term cut as off the table. (tellerwindow.newyorkfed.org) ### What did Williams actually say? Williams did not come out and promise higher rates. But he did say the current stance of policy is “well positioned,” and that inflation is still elevated, labor-market signals are mixed, and uncertainty has risen because of Middle East supply disruptions(tellerwindow.newyorkfed.org)onth.” (tellerwindow.newyorkfed.org) ### Why does “3.6% odds” matter? Because this is not a poll. It is a market price. CME FedWatch is built from fed-funds futures, and those contracts reflect where traders are willing to put money on the Fed’s target rate landing after each meeting. A 3.6% or roughly 4% cut probability means the market’s base case is overwhelmingly “no change” in June. It is less a prediction from economists than a live consensus from people trading the path of rates. (cmegroup.com) ### Why did the odds collapse? Inflation re-accelerated at exactly the wrong time for anyone hoping for quick easing. The Fed’s preferred headline PCE measure rose 3.5% year over year in March, up from 2.8% in February, while core PCE ran at 3.2%. Williams tied part of that jump to tariffs and energy prices. If inflation is moving away from target, the hurdle for cutting gets much higher — even if growth is only okay. (bea.gov) ### Didn’t the Fed already hold rates? Yes. At its April 29 meeting, the Fed kept the target range at 3.50% to 3.75% and said it would keep assessing incoming data, the outlook, and the balance of risks before making further adjustments. That statement left room for movement later. But it did not tee up an imminent cut, and Williams’ remarks pushed markets further toward the idea that the pause could last. (federalreserve.gov) ### Why do risk assets care so much? Lower policy rates usually make cash less attractive and future earnings more valuable. That tends to help long-duration assets — tech stocks, speculative equities, crypto. The reverse is the catch here. If the market stops expecting cuts, discount rates stay high, financing stays expensive, and the “liquidity tailwind” stor(federalreserve.gov) stop expecting relief. (rateprobability.com) ### Is this only about one speech? No — the speech was the catalyst, not the whole cause. Markets were already digesting hotter inflation, firmer yields, and a Fed that had just held steady. Williams gave that backdrop a clean policy read: inflation risks are still real, and current settings are restrictive for a reason. That helped futures markets snap closer to a “higher for longer” path. (tellerwindow([rateprobability.com)6/05/04/key-takeaways-from-president-williamss-speech-on-the-economic-outlook-and-monetary-policy-26/)) ### What should readers watch next? Watch the June 17 FOMC meeting, but also the data before it — especially inflation and labor prints. If price pressures cool fast, cut odds can rebound just as fast. But right now the market is saying something pretty plain: the Fed needs more proof before it even thinks about easing. (rateprobability.com) ### Bottom line? The story is not that the Fed turned hawkish overnight. It is that traders finally stopped pretending a near-term cut was likely. When June cut odds fall to around 3.6%, the message is simple — policy is staying tight unless the data force a change. (tellerwindow.newyorkfed.org)