(Reuters) – U.S. short-term interest rate futures surged on Thursday as traders rushed to place new bets that the Federal Reserve will need to further cut interest rates after President Donald Trump said he will slap 10% tariffs on $300 billion on Chinese goods starting Sept. 1.
Traders are now pricing in two more interest rate cuts by year’s end, and are increasing bets the Fed will need to ease policy further next year to offset risks from the escalating trade war. On Wednesday, traders had mostly given up on the idea of more than a couple more Fed rate cuts, after the Fed cut rates as expected but Fed Chairman Jerome Powell said he did not see a lengthy rate-cutting cycle ahead.
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