Federal Reserve rate expectations just experienced a seismic shift, with traders dramatically reducing bets on aggressive cuts through 2027. The April 2027 Fed funds rate above 3.50% crashed to 32¢ from 56¢ (-24¢), signaling the market no longer expects the deep cuts many had anticipated.

The reversal comes as Fed officials appeared "surprisingly wary" of cutting rates, with several even suggesting the central bank may need to raise rates if inflation remains stubbornly high. Despite Trump's pressure for lower rates and his nomination of Kevin Warsh as the next Fed chair, economists believe Warsh will advocate to push the federal funds rate to a "neutral" level near 3.00%, consistent with only two quarter-point cuts in 2026. The market's dramatic repricing reflects growing skepticism that political pressure will override the Fed's data-driven approach to inflation control.