WASHINGTON (Reuters) – The Federal Reserve got one more reason to wait on cutting interest rates after a delay of the most punitive tariffs imposed in the Trump administration’s trade battle with China appeared to reduce the chance of a U.S. economic slowdown that would force the central bank to rush to the rescue by reducing borrowing costs.

With U.S. bond yields rising and stock futures pointing to higher equity prices, traders of contracts tied to the Fed’s benchmark interest rate pushed out bets for an initial rate reduction to September, and now see only a half-point reduction by year’s end.

A dollar rising after the announcement that tariffs would be lowered for now would also, all things equal, help temper inflation.

The Fed last week kept its target for short-term borrowing costs in the 4.25%-4.50% range. Fed Chair Jerome Powell said that with few signs to far that tariffs are slowing the job market but inflation still above the Fed’s 2% goal, the right move for now is to keep rates where they are until there is more clarity.

Markets had been expecting that the Fed would see a need to cut by July, and priced in a total of three quarter-point interest-rate cuts over the course of the year, based on trading in futures that settle to the Fed’s policy rate. Those expectations shifted after U.S. and Chinese negotiators said they would limit initial tariff increases for 90 days while discussing a more comprehensive deal.

The U.S. lowering to 30% in tariffs that had reached 145% on Chinese imports “significantly reduces the risk of goods shortages and higher inflation,” analysts from Citi said. “The Fed can now more comfortably stay ‘patient.'”

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(Reporting by Howard Schneider; Editing by Nick Zieminski)