Fed's January rate cut probability falls to 19.9%

Summary

The probability of the Federal Reserve cutting rates by 25 basis points in January has fallen to 19.9%, with an 80.1% chance of rates remaining unchanged.Golden Finance

Impact Analysis

So, the market’s clearly adjusting its expectations for a January rate cut, with the probability dropping to just 19.9% from a previous high of 31% last week. This shift likely reflects recent economic data or perhaps a more hawkish tone from the Fed, as seen in their recent communications. Remember, the unemployment rate ticked up to 4.6% in November, which initially had traders betting on more aggressive cuts. But now, it seems the Fed’s focus might be shifting back to inflation control, or they’re just not seeing the economic slowdown as severe enough to warrant immediate action. For us, this means we should be cautious about positioning for rate cuts in the near term. Instead, consider looking at sectors that benefit from stable rates, like financials, which could see a relief rally if the Fed holds steady. Also, keep an eye on the dollar and bond yields, as these will react to any further shifts in rate expectations.