Fed rate decision looms as markets price in 25 basis point cut with 87% probability
With just six days to go until the US Federal Open Market Committee (FOMC) meeting, the odds of a 25 basis point (bps) interest rate cut are growing stronger. The likelihood of a 50bps cut remains slim, although there is still a 13% chance, according to the CME Fedwatch tool.
Markets bet on Fed rate cut
On September 18, 2024, all eyes will turn to the U.S. central bank when the FOMC meets to discuss the federal funds rate. This rate, set by the Federal Reserve, determines the interest rate at which commercial banks lend and borrow excess reserves overnight. It is the primary factor influencing mortgage rates, loan rates, savings accounts, and credit card rates nationwide.
As of 11 a.m. ET today, the CME's Fedwatch tool showed the market pricing in an 87% chance of a 25 basis point rate cut, while the probability of a 50 basis point cut was 13%. The Fedwatch tool, which is known for its accuracy, evaluates futures market prices to predict the implied federal funds rate for each contract month, compared to the current target range set by the Fed.
Meanwhile, Polymarket bettors are betting heavily on a rate cut happening on September 18, with a 98% chance. They estimate a 25 basis point cut has a 92% chance, while a 50 basis point cut is 7%. The $25 million bet also indicates a 2% chance of no rate cut.
As the FOMC meeting continues, market participants appear to be clearly expecting a rate cut. While a smaller cut seems to be favored, uncertainty remains. The Fed’s decision will ripple across the financial landscape, shaping the trajectory of economic conditions and influencing both consumer behavior and broader market sentiment in the days ahead.
What do you think about the upcoming FOMC meeting? Do you expect a rate cut? Share your thoughts and opinions on this topic in the comments section below.
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