Fed Interest Rates More Likely to Stay Higher, Market Shows

Fed Interest Rates More Likely to Stay Higher, Market Shows

Traders’ expectations for Federal Reserve interest rates have shifted over the past month.

After keeping rates on hold at the end of January following a full percentage point of cuts in previous meetings, the market is now expecting the pause to be longer before the next reduction–and there’s a much larger chance of no further reductions for a while, according to the CME FedWatch tool.

Market pricing implies a 44% chance of the next quarter-point move lower at the July 30 decision–before that, the greatest odds are that the key rate stays at 4.25% to 4.5%, the current level. But the difference between odds of a cut then and the Fed standing pat has changed–traders now see a 39.5% that rates stay unchanged then, compared with just a 29% chance on Jan. 17.