The latest Fed meeting takes place on April 30-May 1. A few months ago, investors were betting that a major easing cycle would be well underway by this time. Now markets see virtually no chance of a Fed rate cut on Wednesday, with the first cut not coming until September and possibly not at all.
Economic growth has remained solid while inflation has started to turn higher. Last week's GDP report showed the core PCE price index ran up at 3.7% annualized rate in the first quarter. That made a July rate cut increasingly unlikely and the idea of no Fed cuts in 2024 somewhat more plausible.
The Fed meeting statement and Fed chief Jerome Powell's comments Wednesday afternoon will offer signals on when rate cuts could take place. But that really depends on the economic data. This coming week, investors will get the ISM manufacturing index for April and a slew of labor data, capped by Friday's April jobs report.
Fed Rate Cut Odds
May 1: Markets expect a 2.4% chance of a quarter-point rate cut at the end of the April 30-May 1 meeting, according to CME FedWatch Tool. There was only a 5.4% chance back on April 19 and 9.6% on March 27.
June 12: Investors give only an 11.1% chance of a quarter-point rate cut at the June 11-12 Fed meeting, and 0.2% of 50 basis points by then. On April 19, there was an 18.2% chance of a quarter-point move. It was 70.1% back on March 27.
July 31: There's a 31.3% chance of a quarter-point cut by the July 30-31 meeting, and 5.7% of 50 basis points. On April 19, markets forecast a 43.6% chance of 25 basis points by then, and 6.1% odds for 50 basis points. On March 27, there was an 83.7% chance of 25 basis points and 35.4% for 50 basis points.
Sept. 18: Markets do forecast a rate cut by the Sept. 17-18 Fed meeting, but it's no lock at 57.4%. There's a 13.5% chance of 50 basis points by then. On April 19, the odds were 68.4% and 22.6%, respectively. On March 27, investors pegged 25 basis points at 95.8%, with a 71% chance of 50 basis points and 27% for 75 basis points.
Nov. 7: The odds of a quarter-point Fed rate cut are 67% by the Nov. 6-7 meeting, which ends two days after U.S. elections. There's a 23.4% chance of 50 basis points by this Fed meeting. On April 19, the chances were 75.6% and 33%, respectively. On March 27, the odds were a 97.9% chance for 25 basis points, 83.4% for 50 basis points, 48.9% for 75 basis points and 14.5% for 100 basis points.
Dec. 18: By the final Fed meeting of the year on Dec. 17-18, investors still only see a 79.8% chance of a rate cut, with 20.2% odds of no move at all. There's a 40.3% chance of 50 basis points and 11.4% of 75 basis points.
On April 19, investors saw the chances at 86% for 25 basis points, 51.2% for 50 basis points, 18.2% for 75 basis points and 3.5% for a full point. On March 27, markets expected a 99.4% chance of a quarter-point Fed rate cut by year-end, 93.7% of 50 basis points, 73.5% of 75 basis points and 39.1% of 100 basis points. There was a 10.7% chance of 125 basis points, or five quarter-point Fed rate cuts.
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