The Fed's hawkish turn has decimated rate cut expectations, with markets pricing dramatically lower odds for deeper easing by April 2027. The above-3.00% probability collapsed from 50¢ to just 6¢, while above-2.75% fell from 73¢ to 23¢. This represents a fundamental repricing of the Fed's terminal rate.

Market-based measures of policy rate expectations indicated one to two 25 basis point rate cuts this year according to recent Fed minutes, matching the collapse in aggressive easing bets. Fed Chair Jerome Powell explained the committee's decision, sharing that it was "hard to look at the data and say that policy is significantly restrictive right now." The market now implies the Fed has reached or is approaching its neutral rate, ending the cutting cycle sooner than previously anticipated.