Fed Funds Rate – Target Probabilities at the Fed’s FOMC Meeting Traders are showing a lack of optimism regarding the Fed’s potential for a rate cut at the upcoming FOMC meeting on January 29, 2025. Currently, market expectations indicate a 10.7% probability of a 25 basis point reduction in interest rates. Image: CME Group
Implied Fed Funds Target Rate The Fed has revised its 2025 projections, now anticipating only two rate cuts instead of four, with future reductions dependent on the progress made in managing inflation. Image: Bloomberg
Interest Rates – Implied Fed Funds Target Rate The Fed is likely to cut rates by 25 basis points today, but projections for 2025 indicate a more gradual easing strategy, aiming to boost the economy while keeping inflation in check. Image: Bloomberg
Fed Funds Futures The market has scaled back its outlook for Fed rate cuts in 2025, with current projections showing three cuts, down from earlier forecasts. Image: Bloomberg
Fed Funds Rate and Fed Funds Futures Deutsche Bank’s forecast for the federal funds rate is notably more hawkish compared to many mainstream projections. In light of the election results, the Fed may hold interest rates above 4% throughout 2025. Image: Deutsche Bank
Fed Funds vs. 2-Year U.S. Treasury Yield (Leading Indicator) The current 2-year U.S. Treasury yield, sitting below the fed funds rate, indicates that the Fed’s monetary policy is restrictive. Historically, the 2-year yield tends to lead the fed funds rate by approximately 20 weeks. Image: Bloomberg
Market-Implied Change in Fed Funds Rate Traders are anticipating a total of 75 bps in interest rate cuts by the Federal Reserve over the next 12 months. Image: Goldman Sachs Global Investment Research
Interest Rates – Fed Funds Futures Curve After the Federal Reserve’s recent meeting, the slope of the fed funds futures curve has increased slightly, indicating a shift in market expectations regarding future interest rate movements. Image: The Daily Shot
U.S. Money Market Fund Assets and Fed Funds Rate The current environment suggests that a substantial amount of capital is poised to flow back into equity markets, driven by expectations of favorable economic conditions and monetary policy adjustments. Image: Goldman Sachs Global Investment Research
S&P 500 Index and Fed Funds Effective Rate While Fed rate cuts typically provide a short-term boost to market sentiment, historical trends suggest they often coincide with economic slowdowns. Image: Real Investment Advice
U.S. Recessions – 6-Month Fed Funds Minus Current Fed Funds Rate Historically, U.S. recessions have often followed periods of bearish short-term interest rates, particularly when the Fed cuts rates in response to economic downturns or signs of slowing growth. Image: BofA Research Investment Committee