Aug 7, 2019

Investors are betting on multiple Fed rate cuts by year-end

Data: CME Group; Chart: Andrew Witherspoon/Axios
Data: CME Group; Chart: Andrew Witherspoon/Axios

Despite Fed chair Jay Powell's "hawkish" rate cut last month, expectations for more cuts from the Fed are growing, thanks in large part to President Trump and the trade war.

What's happening: Investors are now pricing in a 0% chance the Fed doesn't move at its next meeting in September and a nearly 50% likelihood of 3 rate cuts by year-end.

  • Fed funds futures prices tracked by CME Group's FedWatch tool shows investors see an almost equal chance that the Fed will either cut rates by a full percentage point by its December meeting or that it cuts 25 basis points — that's in addition to July's 0.25% cut.

Watch this space: The only reason for the Fed to cut rates by 1% or more in a year would be that the U.S. economy is in peril.

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