Jerome Powell’s comments on inflation risks have reduced the odds of a rate cut at the June 2025 FOMC meeting. The market now shows bearish sentiment for a cut.
The Fed rate decision market for June 2025 reflects this shift. Powell cited inflation concerns, driven by the U.S.-Israeli conflict’s effect on oil prices, dampening expectations. The September 17 and December 31 markets are also impacted, though less directly. With projected 2024 inflation at 2.7% PCE and the Fed holding rates steady, caution prevails on future cuts.
Despite 1.75 percentage points of cuts from September 2024 to December 2025, traders remain cautious. The U.S.-Israeli conflict with Iran has increased oil prices, raising inflation. Without a diplomatic solution, the Fed’s policy decisions face added pressure.
The recent $0 volume indicates low liquidity, but significant trades could alter the market. Powell’s statement serves as a warning rather than an immediate trigger.
Traders might consider a contrarian approach. At current bearish odds, a YES share pays $1 if a rate cut happens in June. This would need a major shift in economic data or Fed communication. Watch nonfarm payrolls and CPI data for signs of cooling that could favor a cut.
Monitor Powell’s upcoming speeches and FOMC minutes. Any changes in Fed language or unexpected economic data could be critical.
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