The Federal Reserve’s announcement that it would hold interest rates steady for 2019, that it would end its program to wind down the size of its balance sheet by $50 billion a month in September, and that it projects the economy will grow by just 2.1% in 2019 instead of the earlier forecast for 2.3% real GDP growth hasn’t changed the odds or timing for an interest rate cut overnight.
But the change in the last month is massive.
The CME FedWatch tool, which uses prices in the FedFunds Futures market to calculate the odds of a Fed move on interest rates still projects the odds for rates staying unchanged at the May 1 meeting at 98% and at 91.5% at the June 19 meeting. Odds for a cut start to move steadily upward at the July 31 meeting (16.7%), the September 18 meeting (23.9%), October 30 meeting (28.7%), and December 11 meeting (37.2%.)The odds by the 29 January meeting are still at just 46.9% for a cut. That’s only slightly above the 44.1% odds for a cut yesterday.But it is a massive shift from just a month ago when the odds for an interest rate cut at the January 29 meeting were at just 17.4%.
I’d expect those odds for a January rate cut to drift gradually upward over the next few weeks.
