Fed Rate-Cut Bets at Risk as Powell Says Low Inflation Transient
- Full quarter-point reduction pushed out to end of 1Q of 2020
- Before Wednesday announcement, that move was seen by end-2019
This article is for subscribers only.
Options traders who’ve been betting aggressively on a Federal Reserve interest-rate cut by year-end may have to bail on those positions after Chairman Jerome Powell said inflation is possibly being pulled down by “transitory” forces.
As the dust settled on Wednesday’s policy decision, expectations of rate cuts had already started to seep out of money markets, with around 5 basis points worth shaved from pricing for year-end, relative to the start of the day. Traders now see a full quarter-point of easing by the end of the first quarter of 2020. At the start of the day, overnight swaps reflected wagers that that would happen by this year’s December meeting.