23.06.25 - Rate cut in July?

In addition to the ongoing Middle East conflict, markets took note of recent remarks from two U.S. Federal Reserve Governors. Both signaled support for a rate cut as early as the next FOMC meeting in July.

Currently, the market still sees September as the most likely timing for the first rate cut.

Markets: US equities rebounded, supported by improving risk appetite and a sharp decline in oil prices. Bond yields fell, while gold and cryptocurrencies advanced, reflecting a broader shift into risk and inflation-sensitive assets.

My view: Both dovish Fed members, appointed by Donald Trump, have added momentum to early rate-cut expectations. Their remarks pushed the probability of a July rate cut to around 25%, up from 15% just days earlier. Still, for most market participants, September remains the base case.

At this stage, it’s too early to call a clear direction. Uncertainty remains high, and the full impact of recent geopolitical and macro developments is still unfolding. Upcoming data, especially inflation and labor market figures released early in July will be decisive.

Also worth watching: July 9, when Trump is expected to announce his decision on reciprocal tariffs. Another potential market mover that could shape the Fed’s path forward in either direction.

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