What is the probability of a rate cut? CME FedWatch shows very contained expectations.

According to the CME FedWatch tool, the chances of the Federal Reserve implementing interest rate cuts in the coming months are notably low. For January, the figure is particularly slim, while March presents a slightly more open outlook for potential monetary policy changes.

Expectations for January: very unlikely cut

What is the probability of a 25 basis point rate cut in the first month? Just 2.8%, according to CME FedWatch data. Conversely, the likelihood that rates will remain stable reaches 97.2%, notes ChainCatcher. These figures indicate that the market virtually rules out any downward movement in monetary policy during that period.

Outlook for March: greater openness to changes

The scenario changes when analyzing March. The probability of a cumulative 25 basis point cut rises to 15.5%, while the chance of keeping rates unchanged is at 84.1%. There is also a small 0.4% possibility that the Federal Reserve will implement a cumulative 50 basis point reduction.

Market expectations analysis

These data reveal that the market expects the Federal Reserve to maintain a restrictive stance in the short term. The low probability of a cut reflects expectations of persistent inflation and the need to keep rates high. Only as the quarter progresses, according to CME FedWatch projections, does the probability of rate hikes or cuts increase marginally.