Fed sees 17.7% chance of rate cut in January

Summary

According to CME’s ‘Fed Watch’, the probability of the Federal Reserve cutting rates by 25 basis points in January is 17.7%, with an 82.3% chance of maintaining current rates. By March, the probability of a cumulative 25 basis point cut rises to 45.6%, while maintaining rates is at 46.7%, and a 50 basis point cut is at 7.7%.Zhitong

Impact Analysis

So, the Fed’s rate cut probability for January is pretty low at 17.7%, which means the market isn’t really betting on a cut just yet. But look at March—45.6% chance of a 25 basis point cut. That’s a big jump, suggesting the market sees potential economic shifts or pressures by then. This could be a signal that while the immediate outlook is stable, there’s an undercurrent of concern about growth or inflation that might push the Fed’s hand later. For portfolios, this means keeping an eye on sectors sensitive to rate changes, like financials and real estate. If the March cut becomes more likely, we might see a rally in rate-sensitive stocks. Also, watch the dollar—any rate cut could weaken it, impacting exporters and commodities. Bottom line, stay nimble and ready to pivot as these probabilities evolve.