Despite the Federal Open Market Committee voting 9-1 to keep the benchmark interest rate in a target range between 2.25 and 2.5%, traders in the fed funds futures markets came in with big bets on the Federal Reserve cutting interest rates aggressively in the months ahead. The markets had already expected easing at future meetings, but last week’s post-meeting statement and forecasting materials gave participants further ammunition for predicting an interest rate decrease.

While the fed funds futures indicated just a 15% chance of a rate cut at the July 30-31 meeting in the month of May, and a 85% chance two weeks ago, they showed a 100% chance of a rate cut after last week. For the whole of 2019, the expectation for 3 or more rate cuts as of 2nd July is 54.7%, up from 35.3% in May.


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