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Context:
- When Powell and the Fed announced that they would increase their rates three times this year in November, the market expected a 20% chance that this would happen and lowered it to 7% by the end of the month, says the FedWatch tool of the CME group.
- When the Fed lowered this forecast to two rate hikes in December, the market forecast a 9% increase in the chances of two rises and, at the end of the month, reduced the probability to 0.5%.
- Powell pointed out at each meeting in 2019 that the central bank would be "patient" and "pending" this year, but the likelihood of this happening peaked in March at 96% and has since declined.
- Futures prices of federal funds show that investors only see a 1% chance that interest rates remain in their current range of 2.25% to 2.2% from here. the end of December.
The big picture: Not only does the market see virtually no chance on the part of the Fed, but futures prices show that investors consider that it is more likely that Powell and the company will cut rates at every meeting this year.
Why it's important: Although the Fed, Bank of England and Bank of Japan do not encounter any rate changes this week, investors expect central banks to pivot again and signal that a new Coordinated easing cycle of global politics comes flooding the world with additional capital and liquidity.
- At the same time last year, the market was expecting a coordinated global tightening to curb speculation and control asset bubbles.
- There is also growing concern that monetary policy is losing its effectiveness and central banks are expected to be forced to resort to more extreme and unusual measures to stimulate the weakening of the economy.
Back to back: The Federal Reserve seems to lay the foundation for a reduction in interest rates
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