Traders Adjust Expectations for Federal Reserve Rate Cuts

(Reuters) – Traders of short-term interest-rate futures on Friday now expect the Federal Reserve to cut interest rates just one time this year, scaling back earlier predictions for two rate cuts starting in June.

This change comes after government data revealed the labor market remains strong, alongside a significant increase in consumers’ inflation expectations based on a closely-watched survey.

The market-based probability of a June interest-rate cut dropped to just above 50% after the University of Michigan Surveys of Consumers indicated that households expect inflation to rise to 4.3% a year from now, a full percentage point higher than their previous expectations. Additionally, an earlier report from the Labor Department showed an unemployment rate of 4% in January. Prior to these reports, traders had estimated about a 63% chance of a June rate cut.