CME Predicts Fed Rate Probability for Next Year

Summary

According to CME’s ‘FedWatch’, the probability of the Federal Reserve cutting interest rates by 25 basis points in January next year is 13.3%, and the probability of keeping rates unchanged is 86.7%. By March next year, the probability of a cumulative 25 basis point rate cut is 40.7%, the probability of keeping rates unchanged is 54.4%, and the probability of a cumulative 50 basis point rate cut is 5.0%.CoinLive

Impact Analysis

So, CME’s data is showing a pretty high chance that the Fed will keep rates steady in January, with only a 13.3% chance of a cut. This suggests that the market is expecting the Fed to maintain its current stance, likely due to stable economic indicators. By March, the probability of a rate cut increases, reflecting potential shifts in economic conditions or inflation pressures. The timing here is crucial—right after the holiday season and before Q1 earnings reports, which could influence Fed decisions. Investors should watch for any changes in these probabilities as they could signal shifts in economic sentiment. If the Fed does cut rates, it could boost equities, especially rate-sensitive sectors like real estate and utilities. But with the current high probability of unchanged rates, it might be wise to focus on sectors that benefit from stable interest rates, such as consumer staples and healthcare. Keep an eye on any updates from the Fed or changes in economic data that could sway these probabilities.