Expectations for an emergency rate cut by the Federal Reserve are rising, with the possibility of a 25 basis point cut next week reaching 40%

Odaily Planet Daily reports that due to concerns about a global economic recession triggered by the US government's tariff policy, traders have raised their expectations for the Federal Reserve to cut interest rates this year. Some even believe that the Fed will cut rates before its next meeting. The overnight interest rate swap market shows that the market expects the Fed to cut interest rates by 125 basis points by the end of this year, equivalent to five cuts of 25 basis points each. Although these expectations subsequently fell back, they rose significantly. Compared with last week, the market has only fully digested three expected rate cuts. Swap contracts also show that there is approximately a 40% chance that the Fed will cut interest rates by 25 basis points next week, which is much earlier than its next scheduled policy meeting on May 7th.
Emergency rate cuts are very rare; The last time was at beginning of 2020 when COVID-19 outbreak disrupted markets. In August last year, when U.S stocks plummeted due to yen spread trades being closed out, traders briefly expected an inter-meeting rate cut from Fed but policymakers did not take action.