Fed Interest Rate Steady in July: 95.3% Probability

According to CME's "FedWatch," the probability of the Fed holding interest rates steady in July is 95.3%, while the probability of a 25-basis-point rate cut is 4.7%. The probability of keeping rates unchanged in September is 39.3%, with a cumulative probability of a 25-basis-point rate cut at 58% and a 50-basis-point cut at 2.7%.

Investors are closely monitoring the Federal Reserve's (Fed) interest rate decisions, with July's meeting looming large on the horizon. According to CME's "FedWatch" tool, the probability of the Fed holding interest rates steady in July is 95.3%, while the probability of a 25-basis-point rate cut is 4.7% [1]. Meanwhile, the probability of keeping rates unchanged in September is 39.3%, with a cumulative probability of a 25-basis-point rate cut at 58% and a 50-basis-point cut at 2.7%.

The latest labor market data has fueled speculation about potential rate cuts. The Department of Labor reported 1.974 million continuing claims for the week ending June 14, the highest level since November 2021 [1]. This increase suggests that those out of work are taking longer to find new jobs, which could prompt the Fed to consider rate cuts. Economists see an increase in continuing claims as a sign of a cooling labor market.

Economic data also points to a potential rate cut. The third estimate for gross domestic product (GDP) for the first quarter showed that US economic growth contracted at an annualized rate of 0.5%, more than the 0.2% previously reported [1]. This data, combined with the labor market indicators, is leading many economists to believe that a rate cut is on the cards.

Federal Reserve officials are divided on the timing and extent of rate cuts. While seven officials forecast no interest rate cuts this year, eight are penciling in two cuts [1]. Fed Chair Jerome Powell has stated that the central bank is "well-positioned to wait" before moving interest rates [1]. However, some officials, such as Michelle Bowman, are open to lowering rates as early as July if inflation remains "contained" [1].

Markets are pricing in a 27% chance of a rate cut at the July meeting, up from a 12.5% chance seen last week [1]. The odds of a cut by the end of September have surged to 92% [1]. The Fed's decision to cut rates or not will depend on the evolving economic conditions and the latest data releases.

In conclusion, investors should keep a close eye on the Fed's interest rate decisions and the accompanying economic data. The probability of a rate cut in July is relatively low, but the possibility is growing. The Fed's decision will have significant implications for the economy, financial markets, and investors.

References:
[1] https://www.aol.com/finance/investor-bets-july-rate-cut-152129832.html