The probability that the Federal Reserve will keep the interest rate unchanged in March is 32.1%

According to CME’s “Federal Reserve observation”, the probability of the Federal Reserve keeping interest rates unchanged in March is 32.1%, the probability of raising interest rates by 25 basis points to the range of 4.75% – 5.00% is 67.9%, and the probability of raising interest rates by 50 basis points to the range of 5.00% – 5.25% has dropped to 0%; The probability of a cumulative interest rate increase of 50 basis points by May is 55.2%, the probability of a cumulative interest rate increase of 75 basis points to 5.25% – 5.50% is 24.2%, and the probability of a cumulative interest rate increase of 100 basis points to 5.50% – 5.75% is 0%.

Interpretation of this information:

CME, one of the world’s largest options and futures exchanges, has released its “Federal Reserve observation” report stating that the probability of the Federal Reserve keeping interest rates unchanged in March is just above 30%. Meanwhile, the probability of an increase in interest rates is over 60%, with the majority of this probability aiming at a 25 basis points hike to the range of 4.75% – 5.00%. The probability of increasing interest rates by 50 basis points is zero. The report also stated that the likelihood of the Federal Reserve raising its interest rates by 50 basis points until May has declined to 55.2%. The possibility of a cumulative interest rate increase of 75 basis points is only 24.2%, with another 0% probability for a cumulative interest rate increase of 100 basis points.

The interpretation of the CME’s report is that there is a strong possibility that the Federal Reserve could raise the interest rates for the first time this year, and the main point of interest is whether it will be by 25 or 50 basis points. While it is undoubtedly true that if the Federal Reserve changes its interest rate policy, the impact on the global economic situation is significant, the report’s message is that while there is a movement to raise interest rates, it is not going as quickly as some might have expected.

The rise in the probability for the increase in interest rates may reflect the recent surge in job creation paired with strong gains in hourly wages nurtured by a rapidly growing economy since the onset of last year. The phenomenon strengthened the Fed’s assumption that inflation would eventually rise, prompting policymakers to increase interest rates in response. However, with the probability of a 50 basis point increase in rates by May at zero percent, investors and individuals should not expect an upward trend in the short-term.