High Probability of Interest Rate Hike by Federal Reserve

03/06/2023 23:29 • 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 4.75% – 5.00% in March is 71.6%, and the probability of raising interest rates by 50 points is 28.4%; By May, the probability of a cumulative interest rate increase of 50 basis points is 64.6%, the probability of a cumulative interest rate increase of 75 basis points is 32.6%, and the probability of a cumulative interest rate increase of 100 basis points is 2.8%.

The probability of the Federal Reserve raising interest rate by 50BP in March is 28%

Interpret the above information:

The CME Group has released its “Federal Reserve observation” report that predicts the likelihood of an interest rate hike by the Federal Reserve in the upcoming months. According to the report, there is a high probability of interest rate hikes in March and May 2022.

In March, there is a 71.6% probability of the Federal Reserve raising interest rates by 25 basis points to reach 4.75%-5.00%. In contrast, the probability of a 50 basis points’ rate hike is 28.4%, which is low as compared to the 25 basis points hike. This may suggest a cautious approach by the Federal Reserve to avoid any disruptive impact on the economy.

By May, it is expected that there would be a cumulative interest rate increase of 50 basis points, and the probability is as high as 64.6%. Consequently, there is an increased likelihood of the Fed’s continued rate hikes to curb inflation and stabilize the economy’s overheated growth. However, the report suggests that the probability of an interest rate hike by 75 basis points is 32.6%, indicating some uncertainty in the forecast.

The report further highlights that the probability of a cumulative interest rate increase of 100 basis points by May is only 2.8%, signaling that the Federal Reserve is not planning for any extreme measures and prefers to raise the rate gradually. It also shows that the current interest rates are relatively low, and the Federal Reserve has ample room to increase them gradually without causing any significant impact on the economy.

Overall, the report implies that the Federal Reserve’s focus on inflation control is likely to lead to gradual interest rate hikes in the upcoming months. The report confirms the need for individuals and businesses to keep a close eye on the Federal Reserve’s policies and adjust their financial decisions accordingly.

In conclusion, the Federal Reserve observation report released by CME Group highlights the high probability of interest rate hikes in March and May 2022 to control inflation and stabilize the economy. It reveals that the Federal Reserve will likely be cautious and adopt a gradual approach to interest rate hikes to avoid adversely impacting the economy.

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High Probability of Interest Rate Hike by Federal Reserve

The probability of the Federal Reserve raising interest rate by 50BP in March is 28%

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