Stock Traders Bet Fed Will Cut Rates

Unless the market sees radical changes over the coming days, history suggests the Fed will cut, it has never withheld easing against the market’s expectations.

The Fed’s last words before the customary silence preceding policy makers’ meetings left traders nearly certain the central bank is about to deliver its 3rd rate cut running.

Futures are pricing in 23 basis points of reductions at the Fed’s 29-30 October meeting after Vice Chairman Clarida said Friday the FOMC will act appropriate” to sustain the expansion as risks remain “evident.

The Fed has confirmed via VC’s Clarida’s comments that they are currently biased to cut rates at the October meeting. The window to push back against that has effectively closed.

Traders also see a possibility of more cuts in December, with futures implying a total of 34.5 bpts of reductions by the end of Y 2019. That means, if the anticipated 1/25 pt cut comes this month, markets are forecasting 38% odds of another in the final meeting of the year.

Have a terrific week.