Bloomberg Market Specialists Owen Minde and Cassie Condit contributed to this article. The original version appeared first on the Bloomberg Terminal.
Background
The Federal Reserve has cut interest rates three times this year, partially reversing a series of increases that pushed the benchmark rate toward levels last seen a decade ago, before rates were slashed to counter the Great Recession.
Fed Chairman Jerome Powell said after the most recent rate cut, in late October, that observers shouldn’t expect further cuts in the near future. “We believe monetary policy is in a good place,” Powell said at a news conference. “We see the current stance of policy as likely to remain appropriate as long as incoming information about the economy remains broadly consistent with our outlook.”
The Issue
An analysis with Bloomberg solutions indicates that observers are taking Powell at his word, with Fed funds futures implying a belief that the Fed won’t cut rates again before September 2020.
Bloomberg’s World Interest Rate Probability function finds that the implied post-September 2020 meeting forward rate is 1.281%, which would represent a cut of 27.5 basis points from the current implied overnight rate. The target range is currently 1.50% to 1.75%.
However, Bloomberg’s United States Recession Probability Forecast indicates that this year’s rate cuts have had a slight positive effect on the probability of a recession over the next 12 months, with the predicted chance going from 35% in mid-August to 33% in early November.
Tracking
Use Bloomberg’s newly revamped World Interest Rate Probability function to assess investor expectations of changes to official rates and visualize how they shift over time.
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