High Chances of Interest Rate Hike by US Federal Reserve

02/24/2023 02:45 • Metaverse Matters • 127 views

According to CME’s “Federal Reserve observation”, the probability of the Federal Reserve raising interest rates by 25 basis points to the range of 4.75% – 5.00% in March is 73.0%, and the probability of raising interest rates by 50 basis points to the range of 5.00% – 5.25% is 27.0%; By May, the probability of a cumulative interest rate increase of 25 basis points is 0%, the probability of a cumulative interest rate increase of 50 basis points is 70.3%, the probability of a cumulative interest rate increase of 75 basis points to 5.25% – 5.50% is 28.7%, and the probability of a cumulative interest rate increase of 100 basis points to 5.50% – 5.75% is 1.0%.

The probability of the Federal Reserve raising interest rate by 50BP in March is 27%

Interpret the above information:

The message from CME’s “Federal Reserve observation” provides insight into the expectations of an interest rate hike by the US Federal Reserve. The probability of a 25 basis point increase to the range of 4.75% – 5.00% in March is high at 73.0%. This indicates that the Federal Reserve is likely to continue with their strategy of gradually increasing the interest rates.

However, there is a lower probability of a 50 basis point increase to the range of 5.00% – 5.25%, which stands at 27.0%. This suggests that although the Federal Reserve is expected to increase interest rates, it is not anticipated to be a significant jump.

The observation also estimates the possibility of an interest rate increase by May, with a projected 70.3% probability of a cumulative interest rate increase of 50 basis points. This increase would take the interest rates to a range of 5.00% – 5.25%. There is a relatively lower probability, at 28.7%, of an interest rate increase of 75 basis points to 5.25% – 5.50%. Lastly, there is an insignificant probability of a cumulative interest rate increase of 100 basis points, taking the interest rates to a range of 5.50% – 5.75%, at 1.0%.

These estimates suggest that the Federal Reserve is cautiously planning to increase interest rates, avoiding a sudden and significant jump that could adversely impact the economy. The gradual increase in interest rates is intended to bring down inflation and stabilize economic growth.

In conclusion, CME’s “Federal Reserve observation” indicates a high probability of interest rate hikes by the US Federal Reserve. While the interest rates are expected to increase gradually, the probability of a significant jump in the short term is low. The observation affirms the Federal Reserve’s commitment to maintaining economic stability while cautiously increasing interest rates.

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High Chances of Interest Rate Hike by US Federal Reserve

The probability of the Federal Reserve raising interest rate by 50BP in March is 27%

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