The extreme volatility in the Fed funds market

Market participants overwhelmingly expect a 25 basis-point cut from the Fed at this month's policy meeting, but positioning has varied wildly over the last 2 months.

The big picture: Comments from Fed chair Jay Powell during a speech in Paris pushed the likelihood of a 50-point cut as high as 60% in mid-July, despite strong data prints on U.S. retail sales, unemployment and industrial production. Fed fund futures prices now show investors see just a 14% chance the central bank cuts rates by 50 basis points to a range of 1.75%–2.00%, according to data provided by Deutsche Bank Securities.

Go deeper: The case for a Fed rate cut