US Markets
Friday, November 8th, 2024 3:59 pm EDT
Key Points
- The Federal Reserve reduced the federal funds rate by 0.25 percentage points in November, setting it to a target range of 4.5% to 4.75%.
- Market expectations for another rate cut in December increased to over 70% following the November rate cut, while the probability of a pause in December fell to nearly 29%.
- For January, market pricing suggests a 71% likelihood that the Fed will skip a rate cut, an increase from 67% before the November decision.
The Federal Reserve recently reduced the federal funds rate by 0.25 percentage points, setting it to a target range of 4.5% to 4.75%, which impacts the cost of overnight lending between banks. This decision was announced Thursday at 2 p.m. ET, and it reinforced the financial community’s anticipation of another interest rate cut in December. Before this announcement, market data from the CME FedWatch Tool indicated a 67% probability of a December rate cut and a 33% chance of a pause. Following the rate cut announcement, the probability of another cut in December increased to over 70%, while the likelihood of a pause fell to roughly 29%.
These probability estimates, which are based on the CME FedWatch Tool’s analysis of 30-day fed funds futures trading, suggest a strong market belief that the Fed will continue its rate-cutting trend through December. However, the outlook for January shows a contrasting sentiment: market predictions suggest the Fed may “skip” a rate cut, with a 71% probability for a pause that month. This likelihood of a January pause increased slightly after the November announcement, climbing from 67% to 71%. This nuanced shift reflects the balancing act the Fed faces in navigating economic pressures and managing interest rate expectations moving forward.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/11/07/traders-see-good-chance-the-fed-cuts-again-in-december-then-skips-in-january.html
