Well Worn Path

by | Mar 20, 2023

With a FOMC meeting and rate decision on the plate for Wednesday, it’s a good time to check the market odds of a hike.

According to the CME Group’s FedWatch tool, the Fed Futures are pricing in a 77.5% likelihood of a 25 basis point hike, taking the FOMC’s target range for Fed Funds to 4.75% – 5.00% from its current 4.50% – 4.75% range.

Which, for context, was pretty much the odds that the Fed would hike by 50 basis points the moment before bank runs started the week before last.

Right up to that point, stubborn inflation and an economy still showing signs of life were expected to force the Fed to continue its inflation fight.

But then something broke.

Now the Fed has to fix it. To do so, they will tread a well-worn path: patch  bad bank assets with rate cuts while throwing even more fuel on the inflationary flame.

The odds are greater than 4 in 5 that the Fed will be firmly on the rate cutting path by the end of September.

And we’re most likely to see Fed Funds equal to or below 4.00% in less than a year.

The inflation bid is building. And rallies in gold…

And Bitcoin…

tell me markets are finally starting to bet big on inflation.

Which has always been the only path the Fed could ever really take.

Take What the Markets Give You

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