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

With just six days remaining before the U.S. Federal Reserve's Federal Open Market Committee (FOMC) meeting, the likelihood of a 25 basis points (bps) rate cut continues to grow. Although the possibility of a larger 50bps cut remains slim, CME's Fedwatch tool reports it still holds a 13% chance.

On September 18, 2024, attention will turn to the U.S. central bank as the FOMC convenes to decide 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 plays a critical role in influencing broader financial conditions, impacting mortgage rates, loans, savings accounts, and credit card rates throughout the country.

As of 11 a.m. EDT, CME's Fedwatch tool reveals that the market sees an 87% probability of a 25bps rate cut, while the likelihood of a 50bps reduction stands at 13%. The Fedwatch tool, known for its accuracy, analyzes futures market prices to predict the implied federal funds rate for each contract month and compares it to the current target range set by the Federal Reserve.

Meanwhile, Polymarket bettors are placing significant bets on a rate cut occurring on September 18, assigning it a 98% probability. They estimate the chances of a 25bps cut at 92%, while a 50bps cut holds a 7% probability. Interestingly, a $25 million bet reflects just a 2% chance of no rate cut happening at all.

As the FOMC meeting approaches, market participants seem to be anticipating a rate cut, with a 25bps reduction being the most likely outcome. However, uncertainty still lingers regarding the final decision. The Fed’s choice will have wide-reaching effects, influencing the trajectory of economic conditions and shaping consumer behavior and broader market sentiment in the coming days.

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