The Federal Open Market Committee (FOMC) will be meeting over the next two days (July 30-31). With the markets awaiting the decisions of this committee, I thought an update on what the market is currently expecting would be helpful.
Below is a table showing the currently available futures contracts for Fed Funds. The table rows are the meeting dates and columns are the various range of Target Fed Funds rates. Within each box represented by the respective row and column is the current probability as implied by futures prices.
|
|
125-150 |
150-175 |
175-200 |
200-225 |
225-250 |
|
July 31, 2019 |
|
|
27.1% |
72.9% |
|
|
Sep 18, 2019 |
|
15.9% |
54.1% |
30.0% |
|
|
Oct 30, 2019 |
6.8% |
32.2% |
43.8% |
17.2% |
|
|
Dec 11, 2019 |
16.2% |
36.5% |
34.0% |
10.8% |
|
|
Jan 29, 2020 |
22.3% |
35.7% |
27.0% |
7.6% |
|
|
Mar 18, 2020 |
25.2% |
33.8% |
22.7% |
5.9% |
|
The above table suggests that the market is pricing in a single rate cut of 25 bps at the FOMC meeting over the next couple of days, with an outside chance of 50 bps rate cut. Furthermore, the market is pricing in at least three to four 25 bps rate cuts by early 2020.
Again, the FOMC will make their statement on July 31 and we will be back with that much anticipated decision.
Multnomah Group is a registered investment adviser, registered with the Securities and Exchange Commission. Any information contained herein or on Multnomah Group’s website is provided for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Multnomah Group does not provide legal or tax advice. Any views expressed herein are those of the author(s) and not necessarily those of Multnomah Group or Multnomah Group’s clients.