JPMorgan and Barclays now both see rate cuts later this year

Economists see cuts

It’s tough to argue with the bond market. There’s no doubt now that fixed income is anticipating rate cuts as Trump fights a trade war on two fronts. That’s sent USD/JPY to the lowest since late January today and yields 8 bps lower at the front end.
Barclays now sees the Fed cutting rates three times — a total of 75 basis points — before year end. That mirrors a separate note from JPMorgan today where they forecast two cuts if the trade war with Mexico escalates.
“Last night’s tariff announcement adds yet another trade-related headwind to the growth outlook. If the Administration follows through on the proposed actions, we believe the adverse growth implications would prompt Fed easing.Even if a deal is quickly reached with Mexico, which seems plausible, the damage to business confidence could be lasting, with consequences that might still require a Fed response,” economist Michael Feroli wrote.
The Fed funds market is now seeing a 41% chance of a cut in July and a 73% chance of two cuts before year end.
Economists see cuts