Over 23% of traders now expect interest rate cut at next FOMC meeting

Market sentiment regarding the Federal Reserve’s monetary policy trajectory has shifted notably in the lead-up to the upcoming Federal Open Market Committee (FOMC) meeting. Data compiled from monitoring tools tracking market activity, primarily the CME FedWatch Tool, now indicates that over 23% of traders are factoring in the possibility of an interest rate reduction at the next scheduled gathering.

This emerging minority view represents a significant acceleration in dovish expectations. Just two weeks prior, nearly 95% of the market anticipated the Federal Reserve would hold rates steady, reinforcing the central bank’s ‘higher for longer’ messaging. The sharp pivot suggests that recent key economic indicators are starting to erode confidence in the Fed’s ability to maintain current restrictive levels without causing substantial economic damage.

Analysts attribute the growing likelihood of a preemptive cut primarily to recent softening data points, including lower-than-expected core Personal Consumption Expenditures (PCE) readings and unexpected increases in initial jobless claims, signaling a potential weakening in the labor market. Furthermore, mixed signals regarding liquidity in the financial system have amplified calls for caution. While the prevailing expectation remains a monetary policy hold (around 77% probability), the sudden spike in rate cut forecasts underscores increased volatility and sensitivity within the bond market. Should upcoming macroeconomic reports confirm a sustained deceleration in hiring or price pressures, the 23% figure is expected to climb rapidly.

Source: Over 23% of traders now expect interest rate cut at next FOMC meeting