Probability of Fed Rate Cut Decreases to 71.5%

The probability of a Fed rate cut in September has decreased to 71.5%, with a 28.5% chance of keeping rates unchanged, according to CME's "FedWatch" tool. Initial jobless claims for the week ending August 16 were higher than expected at 235,000.

Title: Probability of Fed Rate Cut in September Falls to 71.5%

The probability of a Federal Reserve (Fed) interest rate cut in September has decreased to 71.5%, according to the CME Group's "FedWatch" tool. This shift comes amidst a backdrop of economic data and geopolitical pressures that have influenced market expectations [1].

Initial jobless claims for the week ending August 16 were higher than expected at 235,000, adding to the uncertainty surrounding the Fed's monetary policy. The increase in jobless claims, which was higher than the projected 225,000, suggests a potential slowdown in the labor market, a factor that could influence the Fed's decision [2].

The probability of keeping rates unchanged has risen to 28.5%, indicating a more cautious stance among market participants. This shift in expectations is driven by recent economic data, particularly the latest U.S. producer price index (PPI) data, which hit a three-year high. The high PPI data has dampened the market’s appetite for an aggressive easing cycle, contributing to the decline in the rate cut probability [1].

Cryptocurrency markets have been particularly sensitive to these developments. Bitcoin and Ethereum have experienced price fluctuations, with on-chain fund flow data showing significant movements in stablecoins. The reduced rate cut probability has prompted many investors to pivot toward stablecoins as a risk-mitigation strategy, reflecting a more measured approach by the Fed [1].

Global markets have also shown signs of adjustment, with Asian equity indices reacting to the potential for a smaller-than-expected rate cut. These movements highlight the broader implications of U.S. monetary policy on international liquidity and asset flows [1].

Despite the uncertainty, the 71.5% probability of a rate cut remains substantial, and expectations of lower borrowing costs continue to dominate market sentiment. The absence of direct commentary from Federal Reserve officials or major crypto leaders on this development adds to the uncertainty. As the Fed's September meeting approaches, further economic data releases and central bank communication will be critical in shaping the final outcome.

References
[1] https://coinedition.com/cme-fedwatch-tool-shows-81-probability-of-a-september-rate-cut/
[2] https://cryptorank.io/news/feed/d2f84-fed-rate-cut-probability-september-crypto-market