A July move is a non-starter but the odds of a September rate cut are currently at ~80%. As for the year itself (four meetings left), a total of ~48 bps of rate cuts are being priced in. In other words, traders are seeing roughly two rate cuts by the Fed before year-end.
Looking at the balance of risks, I would argue that there is a strong sense that we could lean closer towards pricing in one rate cut rather than three rate cuts moving forward. Inflation developments still need to mark better progress, otherwise the Fed might continue to play down softness in other areas of the economy.
Meanwhile, I would say that the bar for the Fed to cut three times this year looks a little high. But one can argue that once they do get the ball rolling, there is a case to be made that they could continue to keep cutting in back-to-back meetings.
For now though, we’re not quite anywhere near that yet. It’s all about taking one data set at a time so let’s see what the jobs report today has to offer.