#FedRateWatch A tool called the **FedWatch Tool** (or FedRateWatch) issued by **CME Group** is one of the most important financial tools relied on by traders and analysts worldwide to predict interest rate decisions made by the U.S. Federal Reserve’s Federal Open Market Committee (FOMC).
### **What is the CME FedWatch tool?**
It is a free interactive tool that displays the probabilities of U.S. monetary policy for the upcoming Federal Open Market Committee (FOMC) meetings. The tool converts the pricing of 30-day (30-Day Fed Fund Futures) federal futures contracts into percentage probabilities for the likelihood of cutting, holding, or raising the interest rate.
### **How it works**
* **Futures contracts as a data source:** The tool relies on the current trading prices of (Fed Funds Futures) contracts that investors and financial institutions trade.
* **Probability formula:** The tool calculates the implied value the market sees for the interest rate level at the end of each upcoming FOMC meeting, then converts those prices into clear probability percentages.
* **Real-time updates:** The probabilities in the tool change continuously as trading activity in derivatives markets responds to released economic data (such as inflation and jobs data).
### **Why the tool matters to traders and investors**
| Area | How to benefit |
|---|---|
| **Stock markets** | Gauge risk appetite; stocks typically prefer low-interest-rate environments. |
### **What is the CME FedWatch tool?**
It is a free interactive tool that displays the probabilities of U.S. monetary policy for the upcoming Federal Open Market Committee (FOMC) meetings. The tool converts the pricing of 30-day (30-Day Fed Fund Futures) federal futures contracts into percentage probabilities for the likelihood of cutting, holding, or raising the interest rate.
### **How it works**
* **Futures contracts as a data source:** The tool relies on the current trading prices of (Fed Funds Futures) contracts that investors and financial institutions trade.
* **Probability formula:** The tool calculates the implied value the market sees for the interest rate level at the end of each upcoming FOMC meeting, then converts those prices into clear probability percentages.
* **Real-time updates:** The probabilities in the tool change continuously as trading activity in derivatives markets responds to released economic data (such as inflation and jobs data).
### **Why the tool matters to traders and investors**
| Area | How to benefit |
|---|---|
| **Stock markets** | Gauge risk appetite; stocks typically prefer low-interest-rate environments. |