Traders are increasingly confident that the Federal Reserve will implement an interest rate cut by July. This optimism follows the Fed’s recent announcement that it has decided to keep short-term borrowing costs unchanged, which was widely anticipated. On Wednesday, futures contracts linked to the Fed’s policy rate adjusted their expectations after the announcement.
The probability of a quarter-point rate cut occurring as early as June has risen to slightly over 30%, compared to the previous estimate of about 27%. This indicates a growing belief among traders that the Fed may act sooner than initially thought. Looking further ahead, based on current futures prices, the likelihood of a rate cut by July is now estimated at around 75%.
This significant probability suggests that many market participants are preparing for a shift in monetary policy in the coming months. Overall, the sentiment among traders reflects a cautious yet optimistic outlook regarding the Federal Reserve’s potential actions on interest rates in the near future.