The Fed finally cuts..markets aren’t buying the full story

After nine months of waiting, the Fed finally pulled the trigger with a 25-bp cut, taking Fed Funds down to 4.00–4.25%.

Powell called it “risk management,” not the start of a big easing cycle, which kind of left markets scratching their heads.

📌 Asia: loved it at first, with the Nikkei touching 45,000 intraday, thanks to tech stocks flying. But a stronger yen quickly spoiled the party.

📌 US: the Dow managed a small win (+0.6%), while the S&P (-0.1%) and Nasdaq (-0.3%) reminded everyone that sentiment is fragile.

📌 Europe: futures pointed to a quiet open, slightly in the green. Nothing dramatic.

Here’s the thing though:

Bloomberg OIS data shows traders don’t buy the “one and done” story.

Pricing now points to four more cuts by mid-2026, with implied rates close to 3.0%. That’s way more aggressive than the Fed’s own dot plot (two this year, one next).

Markets clearly think Powell’s hand will be forced…

And let’s not forget the politics: a Trump appointee pushing for a deeper cut, ongoing noise around Fed independence…it’s messy, and investors hate messy.

👉 For treasurers and fixed income folks, the takeaway is simple:

📍“Higher for longer” is cracking.
📍Volatility around the Fed path isn’t going anywhere.
📍Liquidity tools need to stay flexible.

Powell summed it up perfectly: “There are no risk-free paths.” True, but that’s also why opportunities are popping up everywhere.

Source: Bloomberg