While the Federal Reserve still sees no rate cut in 2019, traders are convicted a rate reduction is coming as soon as July.
The fed funds futures market is now pointing to a 100% chance of an easing of monetary policy next month.Fed chair Jerome Powell said the case for more accommodative policy has strengthened.Drew Angerer | Getty ImagesThe fed funds futures market is now pointing to a 100% chance of an easing of monetary policy next month — a 67% chance of one rate cut to 2% to 2.
tool. The tool is based on futures pricing from live markets and reflect the views of traders placing real bets on the CME exchange.Wednesday. The Fed's so-called dot plot shows that policy makers are divided for the remainder of this year, with eight members favoring one cut this year while the same number voted in favor of the status quo and one still wants a rate hike.
Along with that forecast, comments from Fed's Powell and a tweak to the central bank's statement caused traders to increase bets a cut is coming. Fed chair Jerome Powell said at a press conference Wednesday, adding that policymakers are concerned about some of the recent economic developments. And the Fed dropped the word "patient" from its statement.
"The Fed has clearly opened the door to a rate cut," said Robin Anderson, senior economist at Principal Financial Group. "The Fed is going to do what it can to maintain the current economic expansion, and the shift in language used in today's statement makes it clear that we'll see at least one rate cut this year, potentially two."
Before the Fed announcement on Wednesday, traders were pricing in a 16% chance that the central bank would keep the rates unchanged in July, while seeing a 65% chance of one cut and a 19% chance of two cuts next month.
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