Individual Investors

Insights

Fed Funds Futures: Rate Hike Probability Moves Forward

09/12/2014

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
Fed Funds Futures Trading Data for September 17, 2015 FOMC Meeting
Source: Bloomberg. Data as of 9/12/14.

Past performance is not a guarantee of future results.

Virtus Investment Partners provides this communication as a matter of general information. The opinions stated herein are those of the author and not necessarily the opinions of Virtus, its affiliates or its subadvisers. Portfolio managers at Virtus make investment decisions in accordance with specific client guidelines and restrictions. As a result, client accounts may differ in strategy and composition from the information presented herein. Any facts and statistics quoted are from sources believed to be reliable, but they may be incomplete or condensed and we do not guarantee their accuracy. This communication is not an offer or solicitation to purchase or sell any security, and it is not a research report. Individuals should consult with a qualified financial professional before making any investment decisions.