Eurodollar Options Put Fed Rate-Cut Chances at Below 5%

How Fed Rate Hike Messaging Impacts the Economy

The probability of the Federal Reserve cutting U.S. interest rates in 2016 has fallen below 5 percent for the first time since New Year’s Eve, according to options on eurodollar futures contracts. That number rose above 35 percent in February, during the height of the financial-market turmoil that caused the central bank to mark down projections for rate increases. Minutes of the Federal Open Market Committee’s meeting at the end of April, released May 18, showed officials thought investors may be underestimating the pace of tightening.

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