Probability of Interest Rate Hike in March and Beyond

03/14/2023 22:19 • Digital Disruptors • 123 views

According to CME’s “Federal Reserve observation”, the probability of the Federal Reserve keeping interest rates unchanged in March is 32.1%, the probability of raising interest rates by 25 basis points to the range of 4.75% – 5.00% is 67.9%, and the probability of raising interest rates by 50 basis points to the range of 5.00% – 5.25% has dropped to 0%; The probability of a cumulative interest rate increase of 50 basis points by May is 55.2%, the probability of a cumulative interest rate increase of 75 basis points to 5.25% – 5.50% is 24.2%, and the probability of a cumulative interest rate increase of 100 basis points to 5.50% – 5.75% is 0%.

The probability that the Federal Reserve will keep the interest rate unchanged in March is 32.1%

Analysis based on this information:

The Federal Reserve’s monetary policy is always closely watched by investors and analysts worldwide, as it has a significant impact on the economy and financial markets. The latest report by the Chicago Mercantile Exchange (CME), analyzing the probability of changes in interest rates, provides some interesting insights into the Fed’s stance in the coming months.

According to the report, there is only a 32.1% chance that the interest rates will remain the same in March. On the other hand, there is a high probability of 67.9% that the Fed would raise interest rates by 25 basis points to the range of 4.75% – 5.00%. This indicates that the Fed is taking a hawkish view of the economy and may want to take preemptive action to avoid inflationary pressures.

The interesting and somewhat surprising insight is that the probability of the Federal Reserve raising interest rates by 50 basis points to the range of 5.00% – 5.25% has dropped to 0%, which effectively eliminates the possibility of such a hike any time soon.

Looking ahead to May, the report suggests that the probability of a cumulative 50 basis points interest rate increase is 55.2%. Furthermore, there is a relatively low probability of 24.2% chance that the cumulative interest rate may rise up to 75 basis points to reach 5.25% – 5.50%. It is noteworthy that there is virtually no chance that the interest rates would rise above 100 basis points, as the probability of such an increase stands at 0%.

In conclusion, the report suggests that while there is a high possibility of a 25 basis point hike in March, the probability of a larger increase is quite low. The Federal Reserve is taking a cautious approach as investors are still very sensitive to the recent market volatility. The Fed is also balancing its objective of maintaining economic growth with the need to remain vigilant about inflationary pressures. Investors and individuals should keep this scenario in mind as they work on their strategies and investment decisions.

Keywords: Federal Reserve, Interest Rates, Probability, Monetary Policy.

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Probability of Interest Rate Hike in March and Beyond

The probability that the Federal Reserve will keep the interest rate unchanged in March is 32.1%

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