With just six days to go before the U.S. Federal Reserve’s Federal Open Market Committee (FOMC) meeting, the likelihood of a 25 basis points (bps) rate cut is growing stronger by the day. The possibility of a 50bps cut remains slim, though it still holds a 13% chance, as reported by CME’s Fedwatch tool.
Fed Rate Decision Looms as Market Predicts 25bps Cut With 87% Probability
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Market Bets on Fed Rate Cut
On Sept. 18, 2024, all attention will shift to the U.S. central bank as the FOMC gathers to discuss the federal funds rate. This rate, set by the Federal Reserve, dictates the interest rate at which commercial banks lend and borrow excess reserves overnight. It’s a key factor that influences mortgage rates, lending rates, savings accounts, and credit card rates throughout the country.
As of 11 a.m. EDT today, CME’s Fedwatch tool reveals that the market places an 87% probability on a 25bps rate cut, while the chances of a 50bps cut sit at 13%. The Fedwatch tool, renowned for its accuracy, evaluates futures market prices to predict the implied federal funds rate for each contract month, comparing it with the current target range set by the Fed.
Meanwhile, Polymarket bettors are betting heavily on a rate cut happening on Sept. 18, giving it a 98% likelihood. They estimate a 25bps cut at 92% odds, while the chances of a 50bps cut are 7%. The $25 million bet also indicates just a 2% chance of no rate cut at all.
As the countdown to the FOMC meeting continues, market participants appear to have a clear expectation of a rate cut. While a smaller reduction seems favored, uncertainty still lingers. 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 about this subject in the comments section below.
