Swap contracts show that the probability of the Federal Reserve cutting interest rates by 50 basis points this week has exceeded 50%
According to a report by Gold Ten, bond traders once again believe that the Federal Reserve policymakers are more likely to cut rates by 50 basis points rather than 25 basis points at their meeting this week. Swap contracts linked to the Federal Reserve's interest rate decision show that the possibility of the Federal Reserve cutting rates by 50 basis points this week exceeds 50%, compared to last week when traders almost completely ruled out this possibility. This has pushed the yield on the two-year US Treasury back to its lowest level in two years and dragged the US dollar index to its lowest level since January. Rabobank's senior US strategist Philip Marey wrote that he expects the Federal Reserve to implement a standard 25 basis point rate cut. "Powell's lack of guidance may indicate that the FOMC has not yet reached a consensus. More importantly, retail sales on Tuesday could still change market expectations."
