Markets continue to push back and price out Federal Reserve interest-rate cuts, following weeks of Fed policymakers jawboning and stronger-than-expected inflation and other economic data.
Markets now see scant chance of a Fed rate cut on March 20 and don't expect easing to start until June. Investors have also scaled back expectations of six quarter-point Fed rate cuts in 2024 to four rate cuts, possibly only three.
In late 2023, Fed policymakers signaled they expected three rate cuts this year.
Fed Rate-Cut Odds
March 20: 10% chance of quarter-point rate cut vs. 16% on Feb. 9 and 65.1% on Jan. 16.
May 1: 38.4% chance of quarter-point rate cut; 3.2% chance of cumulative 50 basis points. On Jan. 16, investors saw 97.5% odds of at least a quarter-point Fed cut and 60.5% of a cumulative 50 basis points.
June 12: 81.6% chance of quarter-point cut by this point; 27.9% chance of cumulative half-point rate cut. On Jan. 16, markets saw a 100% chance of at least a quarter-point cut, 98% chance of 50 basis points and 68.6% of 75 basis points.
For the full year, markets see an 88.5% chance of 75 basis points of easing, or three quarter-point Fed rate cuts. There's a 64% chance of 100 basis points.
On Jan. 16, markets saw 125 basis points as highly likely, with 42.1% odds of 150 basis points.
Please follow Ed Carson on Threads at @edcarson1971, X/Twitter at @IBD_ECarson and Bluesky at @edcarson.bsky.social for stock market updates and more.
