Fed Funds Futures: Rate Hike Probability Moves Forward
Here’s an interesting chart worth checking out….
The federal funds futures market offers useful insight into traders’ expectations for what the fed funds rate may be at the time of a scheduled FOMC meeting. The federal funds rate (the interest rate banks charge each other for short-term loans) has been at the current 0% to 0.25% range for nearly six years, since the Fed’s last rate cut in December 2008.
According to recent data (highlighted in green below), fed funds futures traders believe there is an 80% chance that the fed funds rate will be 0.50% or higher by the September 2015 FOMC meeting. To put this into perspective, consider that 62.3% of the market shared this view just six months ago.
Fed Funds Futures Trading Data for September 17, 2015 FOMC Meeting
Source: Bloomberg. Data as of 9/12/14.