Despite the potential inflationary pressures from the Trump administration's tariff policies, the market has fully priced in expectations for the Federal Reserve to cut interest rates five times this year amid fears of a recession in the U.S. economy, with the two-year Treasury yield falling to its lowest level since September 2022.According to the overnight interest rate swap market trends, market pricing indicates that the Federal Reserve will cut rates by 125 basis points by the end of the year, equivalent to five cuts of 25 basis points each. Just last week, the market was only certain of three rate cuts.JP Morgan's Jay Barry strategist team expects that from now until January 2026, the Federal Reserve will decide to cut rates at every FOMC monetary policy meeting held, and they anticipate that by early next year, the upper limit of the federal funds rate target range will decline to 3.0%.As of the time of writing, the two-year Treasury yield has reached its lowest level since September 2022, with yields dropping to around 3.5%, while the ten-year Treasury yield briefly fell below 4%, marking a new low since October of last year.<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/a3b04fb8-0fe8-4e22-935c-0735e6febb37.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/a3b04fb8-0fe8-4e22-935c-0735e6febb37.png"/><img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/f5e3ea56-1b6c-43d1-a05f-f15bf69187d8.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/f5e3ea56-1b6c-43d1-a05f-f15bf69187d8.png"/>&#34;We are in a period of extreme macro uncertainty,&#34; said Daniel Ivascyn, Group Chief Investment Officer at Pacific Investment Management Company (PIMCO). &#34;The nature of this shock is different from other shocks in the past few decades because inflation is already high and is likely to continue rising.&#34;The core logic of market bets has shifted from inflation concerns to recession fears. JP Morgan Chief Economist Bruce Kasman warned, &#34;The scale and destructive impact of U.S. trade policy, if it continues, is enough to push the still-healthy U.S. and global economic expansion into recession.&#34; He raised the risk of recession to 60%.<h2>Will the Federal Reserve be forced to pivot, with five rate cuts expected this year?</h2>Although Federal Reserve Chairman Jerome Powell claimed last Friday that he would not rush to respond to tariffs, traders have quickly changed their expectations, betting that the Federal Reserve may start cutting rates as early as May, with a total of five cuts throughout the year.Kasman predicts that the Federal Reserve will begin cutting rates in June and added, &#34;We now believe the committee will implement rate cuts at every meeting through January of next year, lowering the upper limit of the federal funds rate target range to 3.0%.&#34;Goldman Sachs' team has significantly raised the probability of the U.S. economy entering a recession from 35% to 45%, increasing by 10 percentage points in just one week. They warned that if the White House implements most or all of the proposed tariff measures on April 9, the U.S. economy will inevitably fall into recession.In its non-recession baseline scenario, Goldman Sachs expects the Federal Reserve to take &#34;insurance-style&#34; rate cuts, starting as early as June this year (previously expected in July), with three consecutive cuts of 25 basis points each. In a recession scenario, the expected rate cut by the Federal Reserve could reach approximately 200 basis points<h2>Trump's Tough Stance: Ignoring Market Collapse, Refusing &#34;Trump Put Options&#34;</h2>Trump and his economic team are dismissive of investors' concerns about inflation and recession, unapologetic about market turmoil, and insist that prosperity is on the way. Speaking aboard Air Force One on Sunday, Trump repeatedly defended the tariff frenzy announced last week.&#34;Forget the market for now—we have all the advantages,&#34; Trump stated.Last Friday, the S&amp;P 500 experienced its worst two-day drop since March 2020, falling 6% and wiping out over $5 trillion in market value. The Nasdaq 100 entered a bear market. Wall Street has become increasingly pessimistic about the so-called &#34;Trump put options&#34;—the expectation that Trump would abandon his policies if U.S. stocks fell—even though Trump has previously viewed the stock market as a report card on his administration's performance.<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/3d9d4549-0786-4f1b-a929-4ac89c13c544.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/3d9d4549-0786-4f1b-a929-4ac89c13c544.png"/>

Despite the fact that tariff policies may trigger inflationary pressures, the market has fully priced in the expectation of five interest rate cuts by the Federal Reserve within the year, with the two-year Treasury yield falling to its lowest level since September 2022. JPMorgan Chase expects that from now until January 2026, the Federal Reserve will decide to cut interest rates at every FOMC monetary policy meeting held, and anticipates that by early next year, the upper bound of the federal funds rate target range will decline to 3.0%

- The U.S. market has priced in expectations for five interest rate cuts by the Federal Reserve this year, despite inflationary pressures from Trump's tariff policies.  
- Analysts predict that the Fed will lower rates at every meeting until January 2026, with the federal funds rate potentially dropping to a target range of 3.0%.  
- Concerns over recession have increased, with Goldman Sachs raising the probability of a downturn to 45%, warning that proposed tariffs could lead to inevitable economic decline.

Wallstreetcn

JPMorgan Chase

Goldman Sachs

Interest rate cut expectations are rising! The market bets that the Federal Reserve will cut interest rates five times this year, starting as early as next month