If recession becomes a reality, the Fed may be forced to cut interest rates in June

The Federal Reserve will not cut interest rates at its policy meeting next week, but if concerns about a trade war-induced economic recession intensify, the Federal Reserve may launch a series of rapid rate cuts in June. At least that is the bet of the futures market. After US President Trump's speech on the economy's "transition period" last weekend, contracts linked to the Federal Reserve's policy rate for June, July and October are increasingly pricing in a 25-basis-point rate cut. US stocks and US Treasury yields also fell sharply on Monday as people feared Trump's remarks signaled an impending recession. Federal Reserve Chairman Powell said last Friday that the Federal Reserve is in no hurry to cut rates, as the labor market remains strong, inflation is on a bumpy path toward the 2% target, and the impact of Trump's trade, fiscal, immigration and regulatory policies is highly uncertain. Economists say these policies may push up prices and at least in the short term slow economic development. Goldman Sachs economists on Monday lowered their US economic growth forecast to 1.7% and raised their inflation forecast. This situation may force the Federal Reserve to make a difficult choice, whether to keep the policy rate between the current 4.25%-4.50% to maintain pressure on inflation, or to cut rates to alleviate the deterioration of the labor market. While the market is betting on the latter, some economists believe the Federal Reserve will slow the pace of rate cuts to prevent the price hikes caused by tariffs from stimulating households' and businesses' inflation expectations, as this stimulus could increase the likelihood of a sustained rise in the actual inflation rate.