If rates go up in July but down in December that counts as a cut, right?

YES limit at 20% if anyone is interested

Agree with @MP so Kalshi has this at 15%ish here: https://kalshi.com/markets/ratecut/federal-reserve-rate-cut#ratecut-23dec31

I have been watching the markets which were looking to call the FED's bluff and thought that FED would cut the rates by the end of the year, esp if the economy tanks. On June 27th, they were still at 25-30%, but now they down to 15%ish as well.

A lot of it is because the economy has held up better than many expected. I'm expecting cuts in 2024Q1. Things may change, but leaving some alpha here.

The Fed futures curve is almost entirely removing all cuts from the curve. Right now, markets expect a 4bps cut from November to December. Beware that both predictions are the expected value of many future scenarios, so the current 25% Manifold is pricing seems coherent with market forces.

Truly remarkable that JPow just hit the tape saying he thinks it will be appropriate to hike twice more this year (July and September, one would suppose) and this market thinks they'll cut in one of the next 4 meetings.

@MP btw, Kalshi is at 18% ?still remarkable)

These interest rate markets have been a blessing. It's just betting they'll do what they said they would

@MP Ah, but if you did that in 2021 when they said they were for sure holding rates at 0% through 2023, you'd be in bad shape.

“We on the committee have a view that inflation is going to come down—not so quickly, it will take some time,” Powell said. “In that world, if that forecast is broadly right, it would not be appropriate to cut rates.”

Related market

Related market

https://kalshi.com/events/RATECUT-23DEC31/markets/RATECUT-23DEC31

This real money prediction market is identical. Bought NO on the thesis that real money prediction rates are more efficient than play money rates.

Somewhat surprised Kalshi is so disconnected from implied forward rates

(Disclaimer: not financial advice and not an original screengrab, but presumably is about 9 orders of magnitude higher volume and signal if true)

@Gigacasting That is indeed interesting. It could be that the Kalshi market is mispriced. Although, I don't know if this could be arbitraged.