Fed Dovishness Trumps Hawkishness, Rate Cut Expectations Surge in a Matter of Days
BlockBeats News, November 26th: Investors are increasing their bets, expecting Federal Reserve policymakers to cut interest rates again at next month's rate decision. This move dispelled doubts from last week that leaned towards no rate cut and paved the way for a rise in US Treasury yields. Open interest in futures contracts tied to the Fed's benchmark interest rate surged over the past three trading days, with the January contract setting daily volume records last week.
Currently, market pricing shows that the probability of a 25 basis point rate cut at the Fed's December meeting is around 80%, up from just 30% a few days ago. The shift in rate expectations began with the delayed release of September's employment data last week, which portrayed a mixed economic picture. New York Fed President Williams then stated last Friday that, against a backdrop of weakness in the labor market, he foresaw "near-term" room for a rate cut, further reinforcing this expectation.
"There is a serious division within the Fed, but it seems that the doves have prevailed over the hawks," said Tracy Chen, Portfolio Manager at Brandywine Global. (Golden Finance)
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