Fedspeak in line with market’s view on rate cuts
Comments from Federal Reserve Gov. Christopher Waller Thursday calling for another quarter-point rate cut is in line with views from both financial and prediction markets.
Since the Fed cut interest rates at its last meeting on September 17, positions taken by traders in both markets suggest increased certainty that the central bank will continue to ease at its two-day meeting later this month.
Market-implied odds derived from event contracts offered on Robinhood suggest traders see a 94% chance the central bank cuts its Fed Funds rate target by 0.25 percentage points when it announces its next decision on October 29, as of market close Thursday.
(Robinhood Markets Inc. is the parent company of Sherwood Media, an independently operated media company subject to certain legal and regulatory restrictions. I own stock as part of my compensation.)
Odds implied by prices in the Fed Funds futures markets are an even higher 97%. That’s up from roughly 74% a month ago.
In comments to the National Association of Business Economists earlier this week, Fed Chair Jerome Powell also hit notes supportive of rate cuts.
The Fed chief — who has been the target of a public pressure campaign from President Trump to deliver lower rates — told listeners that a sharp slowdown in hiring in the US is raising worries about economic weakness at the central bank, despite the fact that the Fed’s preferred inflation gauge is still running nearly a full percentage point above its 2% long-term target.
“Rising downside risks to employment have shifted our assessment of the balance of risks,” Powell said.
Since the Fed cut interest rates at its last meeting on September 17, positions taken by traders in both markets suggest increased certainty that the central bank will continue to ease at its two-day meeting later this month.
Market-implied odds derived from event contracts offered on Robinhood suggest traders see a 94% chance the central bank cuts its Fed Funds rate target by 0.25 percentage points when it announces its next decision on October 29, as of market close Thursday.
(Robinhood Markets Inc. is the parent company of Sherwood Media, an independently operated media company subject to certain legal and regulatory restrictions. I own stock as part of my compensation.)
Odds implied by prices in the Fed Funds futures markets are an even higher 97%. That’s up from roughly 74% a month ago.
In comments to the National Association of Business Economists earlier this week, Fed Chair Jerome Powell also hit notes supportive of rate cuts.
The Fed chief — who has been the target of a public pressure campaign from President Trump to deliver lower rates — told listeners that a sharp slowdown in hiring in the US is raising worries about economic weakness at the central bank, despite the fact that the Fed’s preferred inflation gauge is still running nearly a full percentage point above its 2% long-term target.
“Rising downside risks to employment have shifted our assessment of the balance of risks,” Powell said.
