Fed funds futures are sinking as Fed rate cut bets are trimmed
Fed funds futures are sinking as Fed rate cut bets are trimmed and safe haven flows unwind. Equities are brimming with optimism on hopes that the two big downside risks, U.S.-China trade and Brexit could be resolved (even if only partially for the former). The November implied rate is at 1.67%, suggesting about a 65% to 70% chance for a 25 bp rate cut. The January implied is priced for a quarter point cut, but the risk for another easing has fallen to just below 40%. Analysts expect one more rate cut at the end of the month given Fedspeak has continued to mention downside risks while inflation has remained low. Additionally, there's been little outright opposition from Fedspeakers outside of the known hawks.