The market implied rate (from swaps/forwards curves) for the following period is something like 27bps cut, so they say:
- 27 Is bigger than 25, so 0 cuts is 0%
- attribute 2/25bps likelihood to 50bps cut
- the remainder is left to 25bps cut
The reality is that there's a non-zero probability to unchanged, and a non-zero probability of 75bps+ cut etc etc. However this information would probably be in swaption prices and too complicated for anyone like the CME or media to make sense of. But at least with the way people talk about it they get to feel like they're making sense of the world.
In the time since I originally posted that the 400-425 basis point level has dipped another 2%, with that amount going towards a 50 basis point cut. Very muddy waters indeed.
Powell has been adamant about fighting inflation so I struggle to understand how the market gives a zero percent chance of status quo.
I’m with you on Powell but I feel like he’s tired of fighting Trump so he’ll throw a cut just to get everyone off his back a bit.
https://www.cmegroup.com/markets/interest-rates/cme-fedwatch...