SPY, TLT, USD: Fed Rate Cut Expectations Collapse as Inflation Concerns Persist

Fed Rate Cut Expectations Collapse as Inflation Concerns Persist

Apr 29, 2026 19:19 UTC

SPY, TLT, USD

Short term

Financial markets have drastically recalibrated their expectations for monetary policy, with the likelihood of a Federal Reserve rate cut in 2026 nearly evaporating. The shift follows a realization that inflation remains stubbornly above the central bank's 2% target, limiting the Fed's room to maneuver. Chair Jerome Powell noted that a confluence of factors is expected to pressure inflation in the coming months, complicating any path toward easing. This hawkish stance is reinforced by reports that three Fed presidents disagreed with the language in the April FOMC statement, which had previously indicated an easing bias. According to the CME FedWatch Tool, the probability of a rate cut this year plummeted to 1.3%, a sharp decline from the 18% priced in just 24 hours prior. This volatility reflects a rapid market adjustment to the reality of a 'higher for longer' interest rate environment. While Powell clarified that the most recent meeting did not include formal discussions regarding near-term rate hikes, the market has already begun pricing in a slim possibility of an increase. This pivot is likely to increase pressure on growth-sensitive equities and long-term Treasury yields as investors abandon hopes for a timely pivot.

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Fed Rate Cut Expectations Collapse as Inflation Concerns Persist

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