Two Fed rate cuts likely this year, but only if data slips: StanChart strategist

Standard Chartered Bank expects the US Federal Reserve to cut interest rates twice this year. While the Fed hasn’t yet seen strong enough data to require a move, Steven Englander, Managing Director and Global Head of G10 FX Research and North American Macro Strategy believes, “if they were to get that hard data, that they would cut, and they would cut relatively quickly.”Englander noted that surveys, including those conducted by the Fed itself, are already showing signs of economic softness. If incoming data, such as a sharp drop in payrolls, supports this, then cuts may come soon. “They can’t afford to be wrong on this,” he said, adding that the Fed must avoid any perception of political influence.

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On trade policy, Englander said that recent developments on tariffs are less threatening than before. “It looked more likely that they would just roll over the 10% baseline tariff,” he said. A recent court ruling narrowed the administration’s authority on imposing tariffs, requiring more congressional oversight. Englander warned that the ongoing uncertainty “may make it less likely that they get as much revenue as they anticipated” and could weigh slightly on the dollar.As for the dollar outlook, he said, “I don’t think we have hit the lows,” but ruled out a sharp decline. Cautious sentiment among investors and the uncertain effect of fiscal policies are keeping the dollar from falling quickly. He pointed to 2026 as a period when pressure on the currency could build if deficits increase and economic growth falters.

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Englander also commented on US bond yields. He said recent moves in the market were more about positioning than fresh news. “The market is quite short bonds,” he said, and yields could fall if weak data leads to rate cuts. However, he expects yields to stay high by year-end due to fiscal pressures. “We expect the 10-year to close the year closer to 5 than to 4.50,” he said.

For the full interview, watch the accompanying video

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