Resolves to the number of percentage points the Fed changes the fed funds rate at their next scheduled meeting, July 25-26.
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Federal Open Market Committee raised its funds rate by a quarter percentage point to a target range of 5.25%-5.5%.(Raise 0.25)
Fed Rate Decision Announcement at 2pm ET Today.
@SirCryptomind I am betting for NO change, to see if someone who is in finance is correct about their predictions. They are very sure but they have a history of being overconfident.
@parhizj oh nvm I misunderstood your comment, you're saying you know someone who predicts the fed will pause again, and are betting on that
I still believe 2 more hikes of .25, but I would like it if they did 0.5 today and stopped the rest of the year.
.25 already seems pre-baked at the moment with maybe a 0.7-1.1% drop in markets once officially announced. If it goes hot and rises than we for sure will get a 0.25 in September.
(My opinion and analysis)
I've sold all but 1M of my shares in keeping the same given the market is so confident according to this algorithm (99.8%):
https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html
From this morning's T-bill auctions alone it seems clear the market expects the Fed will raises interest rates:
13-week Price: $98.672917
Investment Rate*: 5.409%
26-week Price: $97.345833
Investment Rate*: 5.483%
The CME FedWatch algorithm puts it at 97.3%.
https://archive.is/akQPG
"Supercore inflation, for example, was 3.5 percent over the past year, 2.7 percent at an annual rate over the past six months and 1.1 percent over the past three months. Even I don’t believe that three-month figure, which was probably depressed by statistical noise, but the six-month number is down from 6.8 percent a year ago — and it’s not too far from the Federal Reserve’s target of 2 percent."
"most estimates of underlying inflation are still running significantly above the Fed’s target (although in the case of my preferred measure, not by much), and some economists argue that squeezing out that last bit will be painful. All I can say is that we’ve been hearing such warnings about the “last mile” in fighting inflation for quite a while, and so far underlying inflation has just continued to fall. Also, if getting all the way down to 2 percent will be really hard, should we even bother?"
https://markets.businessinsider.com/news/stocks/us-inflation-outlook-forecasts-recession-hanke-krugman-erian-fed-rates-2023-7
"Fwiw I don't think the Fed was wrong to raise rates; it may even need to keep them high given the economy's surprising resilience," he tweeted. "But there's now a very strong case for pausing and looking around."
@parhizj this is what Krugman thinks the Fed should do. If you asked him what he thinks they will do, I suspect you might get a different answer.
Inflation dropped to 3% (lower than their predictions) so why is the market confident they will increase? I bet 25 mana to entice someone to attempt to explain this.
@parhizj Traders here are informed by expectations from elsewhere. Interest rates futures markets are pricing a high probability of a hike.
https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html
@chrisjbillington I looked at their methodology and it looks like an algorithmic forecast based on those futures. I couldn't find with a quick search validation or accuracy of this model's prediction though...
@parhizj It's basically just taking futures prices and translating them into what the market expectations for future rates are. In my experience they're fairly accurate. And for good reason - if you can beat the market at predicting Fed decisions then you can make lots of money off those futures!
@jack I don't necessarily doubt the accuracy of the underlying market expectations; I am more concerned with validation of the algorithm's translation of the market... Maybe it's buried somewhere on the website or in some academic paper but I haven't had the time to look.
