Traders Bet the Federal Reserve Will Continue Cutting Rates Next Year Instead of Raising Them

#马年开工第一帖 Traders in the US futures and options markets are betting that the Federal Reserve will continue to cut rates next year rather than raise them. The spread of secured overnight financing rate futures (SOFR), which is closely related to Fed policy expectations, is sharply inverted—indicating that traders are beginning to anticipate a longer-lasting easing cycle. Previously, traders had been betting that the Fed would cut rates twice by 25 basis points before the end of this year and then resume rate hikes in 2027. However, debates over the impact of artificial intelligence on the labor market are intensifying, prompting them to reassess these expectations. Jack McIntyre, portfolio manager at Brandywine Global, said, “The question is how AI will lead to inflation; the only possible way AI could cause inflation is through the construction of data centers and the related energy demand.” Meanwhile, in the spot market, traders lack confidence in how to allocate US Treasuries. JPMorgan’s latest client survey (as of the week ending February 23) shows that neutral positions have reached their highest level since the end of 2024.