Doubts Creep In About a Fed Rate Cut This Year

Wall Street’s expectation that the Federal Reserve will cut interest rates several times this year has helped power stocks to records. Now, some investors think the central bank might not cut rates at all.

After the latest blockbuster jobs report Friday showed continuing strength in the economy, more traders are betting the Fed may cut the benchmark federal-funds rate just once or twice this year, fewer than officials’ last median forecast of three quarter-point cuts. And a handful are even starting to wager that the central bank will leave rates where they are.

The shift could pose a challenge to a stock-market rally built on the hope that the economy would slow enough for the Fed to lower borrowing costs from multidecade highs above 5%, but not enough to start a recession.