The Federal Reserve is now under growing pressure to cut interest rates and pump cash into the financial system at its next scheduled meeting later today, as fears of a full-blown market crash and recession spread across global markets.
Rate traders, bond desks, institutional funds, and macro analysts are all bracing for an early policy move after last week’s violent selloff. The reaction has been fast, brutal, and still unfolding.
This escalation follows a chaotic two-day stretch that saw some of the steepest back-to-back market losses in recent memory. On Thursday and Friday, US equities tumbled hard—deeper than any stretch seen since the 1987 crash, the 2008 financial meltdown, or the first wave of the COVID pandemic in 2020.
Bob Michele, global head of fixed income at JPMorgan Asset Management, said in a Bloomberg interview that both the White House and the Federal Reserve “are behaving as though the market moves aren’t business as usual.” Bob said flatly, “We cannot believe that the Fed will wait until something breaks before responding.”
Investors have already started pricing in an aggressive move by the Federal Reserve, even before its next scheduled policy decision. Overnight interest-rate swaps are now showing 125 basis points of expected rate cuts by year-end, equal to five 25-basis-point reductions.
Just one week ago, only three cuts were priced in. Now, traders are betting there’s a 40% chance the Fed slashes its benchmark rate by 25 basis points within days, well ahead of May 7.
The sharp decline reflects a stampede out of risk as panic over President Donald Trump’s tariffs spreads, who has shown no interest in cooling off. On Sunday night, he told reporters, “Forget markets for a second.” He also posted on Truth Social Monday that:
“Oil prices are down, interest rates are down (the slow moving Fed should cut rates!), food prices are down, there is NO INFLATION,” while claiming the US is bringing in “Billions of Dollars a week” from countries facing the new tariffs. Trump then slammed China for retaliating with a 34% tariff hike and called them “the biggest abuser of them all.” He added, “Our past ‘leaders’ are to blame for allowing this, and so much else, to happen to our Country. MAKE AMERICA GREAT AGAIN!”
Bob said the Fed has no time left to wait. He argued that in all three past events with similar market collapses—1987, 2008, and 2020—the Fed intervened right away with major rate cuts. He warned that even though things don’t “look disorderly yet,” that doesn’t mean the system isn’t breaking beneath the surface. “When you look at private credit and look at the percentage of a mean to an extent, it’s very high,” Bob said. “Businesses in the lower-rated end of the quality spectrum have been struggling.” He pointed to the rising cost of borrowing and falling growth as a dangerous mix.
Arthur Hayes, founder of BitMEX and long-time macro trader, posted on social media that the Fed will have no choice but to step in once volatility crosses a certain line. “If you are trying to predict when the Fed caves and goes Brrr, watch the bond volume MOVE Index,” Arthur said. “As it goes higher anyone doing financed treasury or corp bond trades will be forced to sell by higher margin reqs. These are the two markets the Fed will defend to death. >140 yachtzee time!”
Meanwhile, Bob also brought up Federal Reserve Chair Jerome Powell, criticizing his comments from last Friday. Powell said the central bank still sees inflation as “elevated” and warned that the price hikes caused by tariffs may be “temporary,” but still need to be watched.
Powell made it clear he wouldn’t rush to cut rates just because markets are down. But Bob didn’t buy that logic. “Remember, they talked about the long invariable lags,” he said. “So now they’re saying they’re going to wait for the accident before they respond and then wait for the long invariable lags to take hold? I don’t think so.”
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