SA Sentiment: One Fed rate cut in view this year even as Trump pressures Powell

[Reduction and write-off of debts. Reduction of business profitability and deposits. Reduction of the key interest rate by the central bank. Dividend yield reduction. Economy and finance.]
Andrii Yalanskyi

Despite mounting pressure from President Donald Trump, Federal Reserve Chair Jerome Powell has maintained that it’s prudent to wait [https://seekingalpha.com/news/4464226-waiting-to-cut-rates-is-the-prudent-thing-to-do-fed-chair-powell-says] for more economic data before easing interest rates.

Powell admitted this week that if it weren't for Trump's tariffs, the Fed would've likely lowered rates by now. "In effect, we went on hold when we saw the size of the tariffs and essentially all inflation forecasts for the U. S. went up materially as a consequence of the tariffs."

Prior to this, Trump sent Powell a handwritten note [https://seekingalpha.com/news/4463943-trump-blames-powell-fed-board-for-high-interest-rates] calling for the Fed to lower rates "by a lot" and there's "no inflation." To note, May's data showed that core PCE inflation rate - the Fed's preferred inflation gauge - rose [https://seekingalpha.com/news/4463239-feds-preferred-inflation-gauge-heats-up-a-tick-in-may-consumer-spending-income-fall] 2.7% Y/Y, retail inflation climbed [https://seekingalpha.com/news/4457212-cpi-inflation-comes-in-cooler-than-expected-in-may] 2.4% Y/Y, and wholesale inflation increased [https://seekingalpha.com/news/4457606-headline-core-producer-prices-rise-less-than-expected-in-may] 2.6% Y/Y.

Last month, the Fed left rates unchanged at 4.25%-4.50% for the fourth straight meeting and forecast [https://seekingalpha.com/news/4459620-fed-holds-two-rate-cut-outlook-for-2025-as-stagflation-risk-grows] two 25-basis-point rate cuts for the year.

Market participants largely expect another pause at the Fed's meeting this month, and a 25-bp rate cut in September, according to CME's FedWatch tool. However, they appear to be split on how things will proceed for the remainder of the year.

Seeking Alpha readers are increasingly leaning toward just one rate cut this year, according to the latest Sentiment Survey [https://docs.google.com/forms/d/e/1FAIpQLSfn8SUpEdleEtcizK59ao4AbGEPKxvS91VEfpUTYYW_oEBVbQ/viewanalytics] that received over 1,000 responses.

The percentage of respondents expecting one cut increased by 5 percentage points M/M, and up 25 pp since the start of the year. Notably, the percentage expecting no cuts decreased by 10 pp M/M.

Take a look at how SA readers’ rate cut expectations have evolved in the first half of the year:
[Seeking Alpha survey results]
Seeking Alpha survey by Wall Street Breakfast

MORE ON INTEREST RATES

* Trump Gives Fed New Mandate [https://seekingalpha.com/article/4798611-trump-gives-fed-new-mandate]
* Trump To Powell: Lower Rates Abroad, So Why Not Here? [https://seekingalpha.com/article/4798628-trump-handwritten-note-to-powell-lower-rates-abroad-why-not-here]
* Fed's Bostic still sees one 2025 rate cut as trade policy still uncertain [https://seekingalpha.com/news/4463792-feds-bostic-still-sees-one-2025-rate-cut-as-trade-policy-still-packed-with-uncertainty]
* Fed's Kashkari expects two 2025 rate cuts, first possibly in September [https://seekingalpha.com/news/4463251-feds-kashkari-expects-two-2025-rate-cuts-first-possibly-in-september]
* Fed's Collins sees at least one 2025 rate cut, but July likely too soon [https://seekingalpha.com/news/4463037-boston-feds-collins-sees-at-least-one-2025-rate-cut-but-july-likely-too-soon---report]