The Fed’s once oh-so-certain cuts for the rest of 2025 are already fading into oblivion

Economic Data Impact - Stronger-than-expected U.S. economic data is complicating Wall Street's hopes for rapid Fed rate cuts, with weekly jobless claims falling and Q2 GDP growing at an annual rate of 3.8% [1][4] - The resilience of the economy, despite inflation hovering near 3%, has pushed Treasury yields higher and weighed on tech stocks, indicating a narrow path for sustained rate cuts [1][4] Market Reactions - Investors had anticipated multiple base interest rate cuts from the Fed, believing it would stimulate economic activity, but the strong economic performance may delay these cuts [2][3] - The recent strong U.S. data has led to a reduction in expectations for rapid Fed rate cuts, negatively impacting rate-sensitive sectors like technology [4] Labor Market and Inflation - Despite a softening labor market, with less than 30,000 jobs added, elevated inflation near 3% gives the Fed reason to remain cautious about further rate cuts [5] - Analysts had hoped for continued Fed cuts due to labor market conditions, but persistent inflation complicates this outlook [5] Analyst Insights - Kevin Khang from Vanguard noted that any hints of a dovish Fed pivot are met with enthusiasm, but the realities of the yield curve and broader rate environment must be considered [6]