Probability of Interest Rate Hike by the Federal Reserve

02/21/2023 22:45 • AI & Tech Insights • 148 views

According to CME’s “Federal Reserve observation”, the probability of the Federal Reserve raising interest rates by 25 basis points to 4.75% – 5.00% in March is 79% (81.9% yesterday), and the probability of raising interest rates by 50 basis points to 5.00% – 5.25% is 21.0%; The probability of a cumulative interest rate increase of 25 basis points by May is 8.3%, the probability of a cumulative interest rate increase of 50 basis points is 72.9%, and the probability of a cumulative interest rate increase of 75 basis points to 5.25% – 5.50% is 18.6%.

The probability that the Federal Reserve will raise interest rates by 25BP will drop slightly to 79%

Interpretation of the news:

The message by CME’s “Federal Reserve observation” sheds light on the likelihood of interest rate hikes by the Federal Reserve in the coming months. It states that there is a 79% probability of the Federal Reserve raising interest rates by 25 basis points to 4.75% – 5.00% in March. This figure has slightly decreased from 81.9% the previous day indicating that the market is still uncertain about the decision. On the other hand, the probability of raising interest rates by 50 basis points to 5.00% – 5.25% is 21.0%. This indicates that the market is still cautious about the potential consequences of raising interest rates too quickly and potentially harming economic growth.

Additionally, the message reveals that there is a low probability of a cumulative interest rate increase of 25 basis points by May (8.3%). However, the probability of a cumulative interest rate increase of 50 basis points is 72.9%. This shows that there is a growing likelihood of a steady increase in interest rates by the Federal Reserve. Finally, the probability of a cumulative interest rate increase of 75 basis points to 5.25% – 5.50% is 18.6%. This figure indicates that if interest rates do go up, the rise will be gradual.

The message suggests that the Federal Reserve is closely monitoring inflation and is taking necessary measures to stabilize the economy. By raising interest rates, the Federal Reserve is trying to curb the effects of inflation and stabilize the value of the dollar. Furthermore, the message can be interpreted as a signal of the market’s confidence in the Federal Reserve’s actions. The gradual increase in interest rates shows that the market trusts the Federal Reserve to maintain stability while still taking the necessary steps to control inflation.

In conclusion, the message by CME’s “Federal Reserve observation” highlights the probability of interest rate hikes by the Federal Reserve. The market’s cautious approach indicates that there is still uncertainty about the potential effects of increased interest rates. However, the Federal Reserve’s steady and gradual approach towards raising interest rates instills confidence in the market. Therefore, it can be inferred that the Federal Reserve is taking the necessary steps to stabilize the economy while still easing the effects of inflation.

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Probability of Interest Rate Hike by the Federal Reserve

The probability that the Federal Reserve will raise interest rates by 25BP will drop slightly to 79%

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