Fed Hike Aftermath Series: Market pricing 3 rate cuts in 9 month post-FOMC

After U.S. Federal Reserve policymakers hinted at looming rate cuts at yesterday’s meeting where the central tendency of the rate forecasts by FOMC participants declined by 50 basis points, the bond market is pricing 3 rate cuts in the next 9 months.

• The very next cut is now priced in July with 100 percent probability.
• The second rate cut is priced in December with 95.3 percent probability.
• The third rate cut is now priced in March 2020 with 83.2 percent probability.

While the market is pricing three rate cuts before the 2020 election in the United States, the Federal Reserve policymakers have forecasted two rate cuts.