Fed's expectations are under the spotight as 4th rate cut is due

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  • Economy
  • 6 months ago
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The Federal Reserve Bank is aiming to slightly push rates up next week as inflation remains on track along with a healthy labor market and well above average economy.

However future traders are betting that The Federal Reserve will pause its raising of interest rates rather than its original proposal of continuing the same for the course of next year as recent signs of global market instability along with the latest wild trading sessions are sending mixed signals.

Goldman Sachs’ chief economist Jan Hatzius as previously forecasted, “We think the probability of a move in March has now fallen to slightly below 50 percent,” adding that it is likely to, “see a return to quarterly hikes in June that last through the end of 2019.”

That estimate is however way higher than what the financial markets expect it to be.

According to Fed fund futures prices, traders feel there is a 73% chance of a rate hike next week and only a 49% that we see a repeat before the end of the year.

Contracts ending in June 2020 are worth more than contracts ending a year prior, hence it is safe to assume that traders have their money on a rate cut.

Next Wednesday will indeed be interesting as the Fed’s expectations will be under scrutiny.



Source: Smart Trend Team