Rate Cut Odds Shrink Dramatically Following FOMC Decision

-edited

The odds the Fed Funds Rate would be 1.75% to 2.00% fell from 54.2% yesterday to 0% today.

CNBC reports Chances of a September Fed Rate Cut Increase

Traders now see a bigger chance of another rate cut by the Federal Reserve in September after it lowered interest rates for the first time since 2008 and hinted at further accommodation.

The fed funds futures market now points to a 76% of at least a quarter point rate cut at the Fed’s September meeting, according to CME FedWatch tool. Prior to Fed’s decision at 2 p.m. ET, traders were pricing in about a 65% chance of a rate reduction in September.

September Rate Cut Odds

Yes, the odds of a single rate cut rose from 32.6% to 77.3% but the odds of a 50 basis point cut in September fell from 54.2% to 0%. And the odds of no cut rose from 0% to 22.7%.

December CME Odds

Looking ahead to December the odds of a target rate of 1.00-1.25% fell to 0% as did odds of 1.25-1.50%.

The odds there would be no further cuts rose from 0% to 8.4%.

Everything in between shifted in the direction of tighter, not looser Fed policy.

CNBC really messed up this story.

Mike "Mish" Shedlock

Comments (14)
No. 1-10
Tony Bennett
Tony Bennett

"The odds the Fed Funds Rate would be 1.75% to 2.00% fell from 54.2% yesterday to 0% today."

...

heh, nothing a bit of market tantrum won't fix ...

lol
lol

LOL ......sureeee!Everyone knows he's talking smack.Once JP gets bitch slapped by the "market" ,look for rates below zero (NIRP)before Christmas along with massive tsunami wave of fresh money printing!He out of options,treasury borrowing (printing)$ 600 billion a quarter "officially",and we all know it's way way way more than that!

Greggg
Greggg

Casual_Observer
Casual_Observer

Wait until the next economic numbers come out and we actually see job losses. It has started in earnest in big tech at Oracle and Intel. I say 50/50 shot we get another cut this year. There will be some disasters come 2020 which lead to more cuts.

truthseeker
truthseeker

Since they only cut a quarter and ended their liquidity drain 2months early interest rates mostly fell so gold selling off so hard for is a mystery to me-good buy here imo-should I submit this?

thimk
thimk

gold/silver taking a hit. buy the dips ?

HubbaBuba2
HubbaBuba2

As I mentioned in echoing Gundlach a few days ago here - bond markets were 'overexuberant', distorting itself on what the Fed and economy was likely to do. Bonds can bubble too.

Tater-Man
Tater-Man

While many of the views weren't expressed here, a LOT of market investors have been saying a rate cut was completely unnecessary and inappropriate. Unemployment is low, the economy continues to grow at ~2-2.5% real terms (2Q printed 2.1% initial estimate). This is not a situation that requires central planners to intervene.

And some strategists pointed out (earlier) that a rate cut today would be an official admission that Bernanke/Yellen policy failed. QE/ZIRP obviously did fail, but it is a bit surprising that Powell admitted so publicly -- and that 10 out of 12 FOMC members went along with the mea culpa.

In the end, this will hurt people relying on fixed income. It will hurt people struggling to save for retirement and/or college costs. And most importantly for bankers, it won't do a thing to keep the money center banks alive. Still zombies.

Uncle Sam needs to protect money center banks and primary dealers -- there are projected deficits for decades. Entitlement spending and interest now take up 96% of tax revenue, which means ALL OTHER SPENDING is deficit spending.

With baby boomers retiring, social security and medicare will quickly suck up 120% of tax revenue. A partial default on social security / medicare promises is a certainty. Means testing, which is a form of default, is already happening -- but so far it is only "the rich" who are losing benefits. The defaults will spread.

The Fed doesn't matter anymore. Yeah, I read the Marty Zweig quote, but that was back when the US government was solvent. Now a days, the Fed exists to delay the day that Congress has to admit most of their existing promises cannot and will not be paid.

Meanwhile, clueless Democrats are debating tonight about who can make the most bat sh!t crazy empty promise. Trump must love these debates

Tater-Man
Tater-Man

Today, two Obama era officials chastised the Dem "debaters" for promising endless free sh!t, failing to grasp the dire situation the government is already in. And Michael Dukakis, not exactly a mental giant himself, pointed out whomever wins in 2020 is going to be forced to confront deficit spending.

I doubt the Obama officials are pro-Trump. They were trying to help the Dem party come up with a viable candidate because the 20 clowns currently running have no chance.

It is going to be crazy karma in 2020, when Trump wins by a land slide -- only to discover he has no option but to confront deficit spending. HA HA!

Just FYI, combined EFFECTIVE tax rates (federal, state and local) are near the top of the historical range, even after Trump's tax cuts. Please make sure you understand effective versus statutory tax rates before challenging that statement.

Further tax increases would wreck the tax base, as Illinois and NY have been warned by Moodys. A slight tax increase on "the rich" might happen, but it won't be enough. Radical spending cuts are coming, or else radical loss in standard of living is coming.

VPKK
VPKK

MISH, you should at least refresh your CME page before quoting their probability numbers! Those numbers are not always updated 😂