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Highlights
- Traders are increasing the size of their bets against a Fed interest rate cut.
- Fresh data indicates that there is a 0.1% chance of rate cuts at the next FOMC meeting.
- However, pressure is piling of the Federal Reserve to cut rates following the ECB's decision to taper its interest rates.
- Cryptocurrency prices are rallying despite slim odds for rate cuts.
The cautious stance of the Federal Reserve on interest rates has seen the probability for a rate cut tumble to a mere 0.1%. As the June FOMC meeting inches closer, traders are expecting rates to remain steady between 425 and 450 bps, but incoming economic data may sway sentiments. Cryptocurrency prices are rallying despite the low chances for a rate cut, braving analysts’ expectation.
Chances of A Fed Rate Cut Crash To 0.1% At FOMC Meeting
According to CME FedWatch Data, the odds for the US Federal Reserve to cut interest rate to a 400-425 basis points sits at a grim 0.1%. Per the data, there is widespread enthusiasm that the Fed will keep rates between the 425-450 bps after the June 18 FOMC meeting.
Polymarket, the world’s largest prediction market, has similar odds for a Fed rate cut at the next FOMC meeting. In the lead up to May’s FOMC meeting, the probability for a rate cut to 400-425 bps stood at 9%. However, with barely nine days till the next FOMC meeting, the odds have become even grimmer, dousing enthusiasm for a Fed rate cut.
Optimism for a Fed rate cut took a nosedive after the recent US job data showed resilient labor demand. Furthermore, with inflation rates remaining above the Fed’s benchmark, the chances of a Fed rate cut remain slim. Investors have their eyes on the incoming US CPI figures to gauge the Fed’s stance on a potential rate cut.
Apart from the jobs and inflation data, the Fed FOMC meeting minutes reveal a cautious stance toward cuts, citing macroeconomic issues. Powell has his eyes on the impact of Trump tariffs on US economic indices, opting for a wait-and-see approach.
Calls For Interest Rate Cuts Reach Deafening Levels
Despite the odds against a rate cut, the calls for the Fed to reduce interest rates have reached a fervent pitch. After the ECB cut its rates by 25 bps, several opinion leaders have lent their voices to the call for Fed rate cuts.
US President Donald Trump has backed a 100bps Fed rate cut ahead of June’s FOMC meeting, describing the move as rocket fuel for economic growth. Alongside the push for a full-point cut, Trump hurled a flurry of criticisms at Fed Chair Jerome Powell, describing him as a disaster.
President Trump has hinted at the announcement of a new Fed Chair in the near future. Consequently, Polymarket data is tipping former member of the Federal Reserve Board of Governors Kevin Warsh as the most likely successor for Jerome Powell.
Ahead of the FOMC meeting, cryptocurrency prices are rallying, led by Bitcoin and Ethereum, with the global market capitalization adding over $100 billion over the last day.
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