Analysis-Fed's reticence on rate cuts forces market to rethink outlook

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policy meeting.The Federal Open Market Committee held interest rates on Wednesday in a split decision that gave little indication of when borrowing costs might be lowered. It also drew dissent from two Fed governors, both appointees of President Donald Trump who agree with him that monetary policy is too tight.The overnight policy rate controlled by the Fed remains in a 4.25%-4.50% range. The last rate cut was in December and the Fed hiked rates from March 2022 to July 2023 to fight inflation.The lack of a clear signal that the Fed was warming to interest rate cuts as soon as the next meeting in September lifted Treasury yields and the dollar in late trade and turned stocks lower."I think the Fed has pushed out the probability of a rate cut," Sonu Varghese, global macro strategist at Carson Group."They're going to wait for more data, but more data means more time, and more time means rates are going to remain restrictive for a few more months," Varghese said.Fed funds futures traders are pricing in a 46% probability of a rate cut by September, down from about 65% a day ago, according to the CME Group's FedWatch Tool. They are no longer pricing in two full 25 basis point cuts by year-end as they were in recent days.Fed Chair Jerome Powell was careful to keep his options open on monetary policy. "We have made no decisions about September," he said in a press conference. He also noted there was still time to take in a wide range of data before the central bank next met in mid-September."There was some possibility that (Powell) would softly signal that a September rate cut is the base case, and (that it) would only not happen if the data didn't play out in a way that's consistent with that," said David Seif, chief economist for Developed Markets at Nomura in New York."I'd say he did not do that at all."Bond yields climbed on Wednesday as Powell reiterated the economy was showing resilience despite interest rates remaining "modestly restrictive". Benchmark Treasury 10-year yields and two-year yields both rose by about two basis points after those remarks.Investor positioning may have amplified the bond market reaction, said Jamie Patton, co-head of global rates at TCW.Terms and Privacy PolicyPrivacy & Cookie SettingsMore InfoS&P Futures6,314.75 -59.50 (-0.93%)Dow Futures43,921.00 -384.00 (-0.87%)Nasdaq Futures23,117.50 -247.50 (-1.06%)Russell 2000 Futures2,190.00 -30.20 (-1.36%)VIX18.76 +2.04 (+12.21%)Gold3,351.50 +2.90 (+0.09%)PortfolioSign in to access your portfolioSign inTop gainersNEGG Newegg Commerce, Inc. 63.79 +18.82 (+41.85%)APLD Applied Digital Corporation 13.14 +3.11 (+31.01%)FRGE Forge Global Holdings, Inc. 21.92 +5.10 (+30.32%)AMSC American Superconductor Corporation 56.85 +12.91 (+29.38%)PI Impinj, Inc. 154.58 +32.37 (+26.49%)Top losersALGN Align Technology, Inc. 129.01 -74.56 (-36.63%)CFLT Confluent, Inc. 17.73 -8.68 (-32.86%)BAX Baxter International Inc. 21.76 -6.29 (-22.42%)SPSC SPS Commerce, Inc. 108.87 -30.69 (-21.99%)KEX Kirby Corporation 95.31 -24.69 (-20.58%)Most activeNVDA NVIDIA Corporation 177.87 -1.40 (-0.78%)APLD Applied Digital Corporation 13.14 +3.11 (+31.01%)NIO NIO Inc. 4.8700 +0.3600 (+7.98%)SOFI SoFi Technologies, Inc. 22.58 +0.71 (+3.25%)F Ford Motor Company 11.07 +0.20 (+1.84%)Earnings eventsTrending tickersFIG Figma, Inc. 115.50 +82.50 (+250.00%)AMZN Amazon.com, Inc. 234.11 +3.92 (+1.70%)XOM Exxon Mobil Corporation 111.64 -0.26 (-0.23%)CVX Chevron Corporation 151.64 -1.92 (-1.25%)AAPL Apple Inc. 207.57 -1.48 (-0.71%)Top economic events