Probability Analysis: Market Expectations Regarding Federal Reserve Rate Decision

According to data from the CME Federal Reserve Watchdog Reported by Jinshi, the market maintains cautious expectations regarding potential changes in monetary policy in the coming months. The probability data reflect investors’ uncertainty about whether the Federal Reserve will maintain the status quo or initiate a easing process.

Short-term outlook: expectations for March and April

The chances of immediate changes are low. For March, the probability of a 25 basis point cut is just 10%, while holding rates steady is at 90%. This predominance indicates that the market does not anticipate drastic movements in the short term.

As April approaches, the likelihood of changes begins to increase slightly. The data show a 21.6% chance of a cumulative 25 basis point reduction, while maintaining rates remains at 77%. Marginally, there is a 1.5% chance of more aggressive 50 basis point cuts during that period.

Reduction scenarios based on CME probability analysis

CME’s probability analysis presents a progressive outlook. Although the chances of changes in the short term are limited, the monitoring tool allows visualization of how the market anticipates an eventual shift in monetary policy direction.

Comparing different time horizons suggests that financial markets expect increased decision-making activity as months progress, with a growing probability of Federal Reserve interventions to adjust rate levels.

Outlook for June: increasing probability of movements

By June, the probability reaches 44.8% of a cumulative 25 basis point reduction. This significant increase compared to previous months reflects the market’s rising expectations that the Federal Reserve will eventually begin a rate easing cycle.

Consolidated probability data show that the market is shifting from a defensive stance in March toward higher expectations of changes by mid-year. This progressive shift in probability calculations indicates how investors are adjusting their forecasts as economic data and monetary policy signals accumulate.