Fed rate cut markets are cratering as traders price out aggressive easing, with April 2027 odds above 3.50% collapsing from 57¢ to just 1¢. The broad selloff across rate cut bets reflects mounting concerns about sticky inflation and a more hawkish stance from Fed officials. Powell recently noted that core PCE inflation remains at 3.0 percent over 12 months ending in December, showing "on net, no progress".

Recent Fed minutes reveal that "most participants" worried that progress toward the Fed's 2% inflation target might be slower than expected, with some citing reports from businesses who anticipated raising prices in 2026 to cope with costs, including those related to tariffs. With Powell's term ending in May and Trump expected to nominate a new chair, traders are betting on a more cautious approach to rate cuts. Markets now see the Fed holding rates higher for longer, with some officials even keeping rate increases "on the table."