Gold Finance reports that the futures market is betting that the Federal Reserve will not cut interest rates at next week's policy meeting, but if concerns about a recession triggered by the trade war come true, the Fed may initiate a series of rapid rate cuts in June. After President Trump's speech last weekend about an economic "transition period", traders are betting that the Fed will quickly cut rates when the economy slides, and more and more people in the futures market expect consecutive rate cuts in June, July and October. Fed officials face a dilemma of rising inflation and weak economy.
The U.S. stock market and Treasury yields also fell sharply on Monday due to fears that Trump's comments indicate an impending economic recession. Federal Reserve Chairman Powell said last Friday that there was no rush to cut interest rates because labor markets remain strong while inflation faces bumps on its path towards 2% target; there is great uncertainty over impacts from Trump’s trade, fiscal, immigration and regulatory policies. Economists say these policies could push up prices and slow down economic growth at least in short term. Goldman Sachs economists lowered their forecast for US economic growth to 1.7% on Monday while raising their inflation expectations.