Rate Futures Indicate Idle FOMC
Interest rate futures markets indicate a foregone conclusion to this afternoon’s rate announcement, as the Fed is widely expected to leave the Fed funds rate unchanged at 2%. Recent Fed speak has hinted at forthcoming rate increases, despite the prevalence of downside risks; however, the continued struggles in the credit market and deteriorating market confidence should leave the Fed’s hands tied.
Front month Fed fund futures are nearly unchanged on the day and currently show a 93% chance the Fed will leave rates unchanged this afternoon. Fed fund options fall directly in line with front month futures, also indicating a 93% chance the Fed funds rate will be left at 2%.
Binary options show a 95% chance the Fed will leave rates unchanged this afternoon, along with a 3.8% chance of a 25bps hike and a 1.1% chance of a 50bps hike.