Market Expects 97.4% Chance Fed Holds Rates in June

The latest data from the CME FedWatch Tool indicates a significant shift in market expectations regarding the Federal Reserve's monetary policy for June. There is a 97.4% probability that the Federal Reserve will maintain interest rates within the current range of 5.25% to 5.50%. Conversely, the likelihood of a 25 basis point rate cut in June stands at a mere 2.6%. This data suggests a strong consensus among market participants that the Federal Reserve will keep interest rates unchanged in the near term.

The low probability of a rate cut in June reflects the current economic conditions and the Federal Reserve's stance on inflation and economic growth. The strong US jobs data released recently has cooled down the market's expectations for a rate cut, as it indicates a robust labor market and economic stability. This data has led to a reduction in the odds of a rate cut in July as well, falling to 16% from 30% the previous day. Traders now anticipate that the next potential rate cut will come later in the year, if at all.

The market's call for three 25 basis point rate cuts this year, as indicated by some analysts, seems to be fading away. The current levels suggest that the market is only about 2.6% away from expecting no rate cuts at all. This shift in expectations is likely due to the recent economic data, which has shown signs of strength and stability. The strong US jobs data, in particular, has played a significant role in cooling down the market's expectations for a rate cut.

The probability of the Federal Reserve maintaining rates unchanged in June is a clear indication of the market's confidence in the current economic conditions. The low probability of a rate cut suggests that the market expects the Federal Reserve to continue its current monetary policy, which is aimed at controlling inflation and promoting economic growth. The recent economic data, including the strong US jobs data, has further reinforced this expectation.