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Federal Reserve Interest Rate Forecast Shows Expected Fluctuations

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It is reported that the latest pricing of the overnight index swap (OIS) shows that the policy interest rate of the Federal Reserve will reach a peak of about 4

Federal Reserve Interest Rate Forecast Shows Expected Fluctuations

It is reported that the latest pricing of the overnight index swap (OIS) shows that the policy interest rate of the Federal Reserve will reach a peak of about 4.83% at the May meeting. Compared with the current level, it means that the Federal Reserve has about 25 basis points of room to raise interest rates, and then there will be about three interest rate cuts of 25 basis points each time at the December meeting. By contrast, last Friday’s closing level showed that the market expected the policy interest rate to reach a peak of 5.30% at the June meeting, while last Thursday showed that it would reach a peak of about 5.5% at the July meeting. The OIS linked to the December meeting has been reduced to slightly higher than 4%, which means that the interest rate will be reduced by about 80 basis points from the peak expected by the market in May, which is similar to three interest rate cuts of 25 basis points each time; December OIS closed at 4.90% on Friday.

The swap contract shows that the market expects the Federal Reserve policy interest rate to peak in May, and then will reduce the interest rate by 75 basis points by the end of the year

Analysis based on this information:


The recent overnight index swap (OIS) reports indicate that the Federal Reserve’s policy interest rate will reach a peak of 4.83% during the May meeting. This forecast represents a 25 basis point increase from the current rate and suggests that the Federal Reserve has limited room to raise interest rates further. However, the OIS estimates also forecast three interest rate cuts of 25 basis points each for the December meeting, indicating a potential decline in the policy rate.

The latest OIS reports show fluctuations in market expectations regarding Federal Reserve interest rates. Market expectations last Friday predicted a peak interest rate of 5.30% during the June meeting, compared to an earlier prediction of 5.5% during the July meeting. These variations suggest a level of uncertainty regarding the economic outlook and the Federal Reserve’s future actions.

The OIS linked to the December meeting indicates a slight increase of just over 4%, which suggests a potential decrease of approximately 80 basis points from the peak rate expected during the May meeting. This decline correlates with the predicted three rate cuts, each of which would lower the interest rate by 25 basis points. Additionally, the December OIS closed at 4.9% on Friday, which is lower than the anticipated May peak.

Overall, the Federal Reserve interest rate forecast shows market expectations for fluctuations in the policy rate. While the recent reports indicate a potential increase in the Federal Reserve’s policy rate for the May meeting, there is an expected decline in interest rates for the December meeting. These fluctuations are indicative of changes in economic outlook and uncertainty around the Federal Reserve’s future actions.

In summary, this report highlights the cautious approach that the Federal Reserve may take in the upcoming year. The market expectation for fluctuations in interest rates highlights an uncertain economic outlook and indicates the need for careful consideration of long-term economic policy decisions. The three keywords that best describe this report are the Federal Reserve, interest rates, and market expectations.

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