Fed Maintains Rates in June with 93.5% Probability

Summary

CME FedWatch data indicates a 93.5% probability that the Federal Reserve will maintain interest rates at 3.5%-3.75% in June, with an 86.5% chance of holding steady through July [Zhitong][]. This follows the Fed’s April decision to pause amid $120/barrel oil prices and geopolitical tensions in the Middle East [Fidelity][Fidelity].

Impact Analysis

So, the market is basically admitting that a June cut is dead on arrival, with a 93.5% probability of a hold. We’ve seen a total recalibration since late April; remember when the hold probability was nearly 100% for the short term but people still hoped for a summer pivot? [QQ News][Invezz] That hope has evaporated because of the $120 oil price floor and the U.S.-Iran conflict—classic supply-side inflation that the Fed can’t ignore [Fidelity][腾讯新闻 - 财经].

What’s more interesting is the leadership transition. With Powell likely exiting and Kevin Warsh’s nomination moving forward, the committee is in ‘lame duck’ territory, making a bold policy shift even less likely [Reuters][Reuters]. They’re paralyzed by energy costs and geopolitical uncertainty [Fidelity]. Bottom line: follow the smart money. Buffett sitting on $350 billion in cash is the ultimate signal [腾讯新闻 - 财经]. This isn’t the time to bet on a dovish surprise. Stay defensive, favor cash or short-duration paper, and don’t expect a meaningful move until September at the earliest.