Traders are now 100% certain the Federal Reserve will cut interest rates by September.
There are now 93.3% odds that the Fed’s target range for the federal funds rate, its key rate, will be lowered by a quarter percentage point to 5% to 5.25% in September from the current 5.25% to 5.50%, according to the CME FedWatch tool. And there are 6.7% odds that the rate will be a half percentage point lower in September, accounting for some traders believing the central bank will cut at its meeting at the end of July and again in September, says the tool. Taken together, you get the 100% odds.
The catalyst for the change in odds was the consumer price index update for June announced last week, which showed a 0.1% decrease from the prior month. That put the annual inflation rate at 3%, the lowest in three years. Odds that rates would be cut in September were about 70% a month ago.
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