Rate Futures Indicate FOMC to Leave Rate at 2%
Fed funds futures, including Fed Fund options and binary options, continue to show a resounding bias favoring an unchanged Fed funds rate after tomorrow’s FOMC rate announcement.
Fed fund futures are slightly higher on the day in response to higher-than-expected June PCE data this morning, but still show a 92% chance the Fed funds rate will be left at 2% tomorrow. Further-dated Fed fund futures are slightly lower and now show a 28% chance of rate hike in September (from 30% on Friday).
Front-month binary options show a 95% chance the Fed will leave rates unchanged tomorrow, with 3.4% betting on a 25bp hike and 1.3% betting on a 50bp hike. Further-dated binary options show only a 52.6% chance the Fed will leave its rate unchanged in September, with an 18.6% chance of a 25bp hike, a 10.3% chance of a 50bp hike, and an 8.1% chance of a 25bp rate cut in September.