Investors lean into mid‑year Fed easing while gold and front‑end rates price in deeper policy risk
Investors are split on how quickly the US Federal Reserve will ease, but most are now converging on mid‑year cuts rather than a March move.
According to Reuters, major American brokerages including Goldman Sachs and Morgan Stanley expect the next Fed interest rate cut in June, while Citigroup now calls for an initial move in April after previously betting on March.
Reuters also said a poll of economists points to no change through Jerome Powell’s term ending in May, with the first cut likely coming under his expected successor, Kevin Warsh, in June.
Stronger US labour data have already pushed back early‑cut hopes.
Bloomberg reported that US nonfarm payrolls rose 130,000 in January, about double the median forecast, while the unemployment rate fell to 4.3 percent.
Surprise sent two‑year US Treasury yields as high as 3.55 percent and cut market pricing for 2026 easing to about 52 basis points by December, with less than a 5 percent chance of a March cut.
Inflation is nudging markets back toward a June start rather than a full‑year pause.
Reuters reported that headline US Consumer Price Index rose 0.2 percent in January, below economists’ 0.3 percent forecast, with core CPI up 0.3 percent.
After that release, Fed funds futures implied nearly a 70 percent chance of a June cut and around 64 basis points of easing this year, up from 58 basis points before the data.
A later inflation print reinforced that trend.
Tiffany Wilding at Pacific Investment Management Co. told Bloomberg the data were “pretty encouraging under the surface” and said the Fed should feel “more comfortable cutting interest rates,” making “a couple more cuts in couple more cuts in this year” reasonable.
Street forecasts for 2026 remain wide.
As per Reuters, most large American banks cluster around 50 basis points of cuts that would leave the fed funds rate near 3.00–3.25 percent, while Citigroup is more dovish at 75 basis points and a 2.75–3.00 percent range.
On the other side, BNP Paribas, HSBC, JP Morgan and Standard Chartered all see no cuts, keeping rates closer to 3.50–3.75 percent, and Macquarie even projects a rate hike in the fourth quarter.
Fed officials are signalling patience rather than urgency.
Bloomberg reported that Kansas City Fed President Jeff Schmid wants rates held at a “somewhat restrictive” level because inflation remains too high, while Cleveland Fed President Beth Hammack has flagged the possibility of an extended hold.
Gennadiy Goldberg at TD Securities told Bloomberg the data “suggests that the Fed remains in no rush to cut interest rates in the near‑term,” but argued markets will struggle to price out all cuts this year, expecting 10‑year yields to stay around 4.10–4.30 percent.
Others are leaning into the opposite bet.
CNBC reported that Greenlight Capital’s David Einhorn expects “more interest rate cuts this year than what’s being anticipated,” seeing that as support for his long gold position and SOFR futures – effectively wagers on lower short‑term rates.
Markets still price more than an 88 percent chance of two quarter‑point cuts by year‑end, even after expectations cooled on the back of the strong January US jobs data.
