Markets price out Fed cuts
- Barclays dropped its call for a September Fed cut on May 4, joining a growing camp that now expects the Federal Reserve to stay put all year. (money.usnews.com) - The market shift is sharp: CME FedWatch showed about a 78.7% chance of no change by year-end after the Fed’s split 8-4 hold. (money.usnews.com) - Higher oil-driven inflation is the whole story now — and investors are pushing expected easing into 2027. (money.usnews.com)
Interest rates are back to being an inflation story. Not a slowdown story, not a rescue story. The shift happened fast after the Fed’s April 29 meeting, (money.usnews.com)rapped its call for a September cut and moved into the no-cuts camp for 2026. (cnbc.com)change is that investors and forecasters now think the next move is much less likely to be a cut anytime soon, because inflation is proving sticky again and energy prices are doing the Fed no favors. (cnbc.com) ### Why did Barclays matter? Barclays mattered because it was one more large shop abandoning the old script. It had been looking for a 25-basis-point cut in September 2026. On May 4, it pulled that forecast, said it now expects no easing this year, and kept only a March 2027 quarter-point cut in its outlook. That tells you the center of gravity on Wall Street is moving. (money.usnews.com) ### Why is inflation suddenly the problem again? Oil. Basically, the market thinks higher energy prices tied to the Iran war can leak into everything else — gasoline, shipping, production costs, and then broader inflation measures. The (cnbc.com)se in global energy prices and that Middle East developments are adding a high level of uncertainty. (money.usnews.com) ### What did the Fed itself signal? The Fed did not formally say hikes are coming. But the split told investors the commit(money.usnews.com)central bank lining up to ease. It reads more like a committee arguing over whether policy is still too dovish for the inflation risk in front of it. (cnbc.com) ### What are traders pricing now? The cleanest takeaway is simple: fewer cuts, later. Reuters’ May 4 report said traders were pricing roughly a 78.7% probability of no change by year-end (money.usnews.com)dence in cuts — it is actively leaning toward a longer hold. (money.usnews.com) ### Why does that hit markets so hard? Because a lot of asset prices like the idea of falling rates. Lower rates help stocks, housing, and long-duration bets. Higher-for-longer rates do the opposite. They keep b(cnbc.com)g macro fear and inflation anxiety, got hit in volatile trading on May 5, with one report showing spot gold down more than 2% to about $4,527. (ibtimes.com.au) ### Does this mean no cuts, period? No. The catch is that the Fed can still change course quickly if the labor market cracks. Barclays sai(money.usnews.com)s message is that inflation risk has overtaken growth risk. (money.usnews.com) ### Bottom line? Markets have not fully pivoted to expecting hikes. But they have clearly backed away from the comforting idea that cuts are around the corner. For now, the Fed looks stuck — and “stuck” is enough to reprice everything. (money.usnews.com)
