FameEX Hot Topics | Fed Rate Decision Nears as Market Expects 25bps Cut with 87% Probability

With only six days left before the U.S. Federal Reserve's Federal Open Market Committee (FOMC) meeting, the likelihood of a 25 basis points (bps) rate cut is increasing. While the chance of a larger 50bps cut remains slim, CME’s Fedwatch tool still places it at 13%.

On September 18, 2024, all eyes will be on the U.S. central bank as the FOMC gathers to make a decision on the federal funds rate. This rate, set by the Federal Reserve, determines the interest rates at which commercial banks lend and borrow excess reserves overnight. It is a key factor in shaping financial conditions across the economy, impacting mortgage rates, loans, savings accounts, and credit card rates.

As of 11 a.m. EDT, CME’s Fedwatch tool indicates that the market assigns an 87% probability to a 25bps rate cut, with a 13% likelihood of a 50bps reduction. Known for its accuracy, the Fedwatch tool evaluates futures market prices to estimate the implied federal funds rate for each contract month and compares it with the current target range set by the Federal Reserve.

Polymarket bettors are also leaning heavily toward a rate cut on September 18, giving it a 98% probability. They estimate a 25bps cut has a 92% chance, while a 50bps reduction holds a 7% probability. A $25 million bet shows only a 2% chance that no rate cut will occur.

As the FOMC meeting draws near, market participants appear confident that a rate cut will happen, with a 25bps reduction being the most favored outcome. However, some uncertainty remains about the final decision. The Federal Reserve’s move will have significant ripple effects, influencing the direction of economic conditions and shaping both consumer behavior and broader market sentiment in the days following the announcement.

Disclaimer: The information provided in this section is for informational purposes only, doesn't represent any investment advice or FameEX's official view.