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Markets seek confirmation for the relief of Fed's policy – Axios



Background:

  • When Powell and Fed predicted to raise interest rates three times this year in November, the market had a 20% chance of happening and wrote it up to 7% by the end of the month The CME FedWatch Tool shows
  • When the Federal Reserve downgrades this forecast to two interest rate hikes in December, the market has estimated a 9% chance of 2 increases and by the end of the month the probability has fallen to 0.5%.
  • Powell at each meeting in 2019 stressed that the central bank would be "patient" and "detained" this year, but the likelihood of that being so peaked in March at 96% and has fallen since then.
  • Investors have shown that interest rates, with a probability of 1%, remain in their current range of 2.25% -2.50% by the end of December.

The big picture: The market sees little or no chance of the Fed to continue Futures prices show that investors think Powell and the company are more likely to cut interest rates each month

Why is it important: Although no change in rates is expected, with Fed, Bank of England and Bank of Japan meetings this week, investors expect central banks to revolve and signal another round

  • At that time last year, the market expected a global coordinated tightening delay and speculation and asset ballooning. Monetary policy is losing its effectiveness and expectations that central banks will be forced to resort to more extreme and unusual measures to stimulate a weakening economy.

Flashback: The Federal Reserve seems to lay the foundations for reducing interest rates.


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