The probability of the Federal Reserve raising interest rate by 50BP in March is 27%

According to CME’s “Federal Reserve observation”, the probability of the Federal Reserve raising interest rates by 25 basis points to the range of 4.75% – 5.00% in March is 73.0%, and the probability of raising interest rates by 50 basis points to the range of 5.00% – 5.25% is 27.0%; By May, the probability of a cumulative interest rate increase of 25 basis points is 0%, the probability of a cumulative interest rate increase of 50 basis points is 70.3%, the probability of a cumulative interest rate increase of 75 basis points to 5.25% – 5.50% is 28.7%, and the probability of a cumulative interest rate increase of 100 basis points to 5.50% – 5.75% is 1.0%.

Interpretation of this information:

CME’s “Federal Reserve observation” has forecasted the probability of the Federal Reserve raising interest rates in the upcoming months. The report indicates a high probability of a 25 basis points interest rate increase to the range of 4.75% – 5.00% in March, at 73.0%. In contrast, the probability of a 50 basis points increase to the range of 5.00% – 5.25% is comparatively lower at 27.0%.

Looking ahead, CME predicts a 0% probability of a cumulative interest rate increase of 25 basis points by May. The report instead forecasts a likely 50 basis points increase with a probability of 70.3%. Additionally, the probability of a cumulative interest rate increase of 75 basis points to 5.25% – 5.50% is 28.7%. The report also indicates a less probable scenario of a cumulative interest rate increase of 100 basis points to 5.50% – 5.75% with a probability of 1.0%.

The Federal Reserve’s policies significantly impact the US economy and global markets. Interest rate changes influence investment and consumption behavior, impacting the overall growth and stability of the economy. CME’s predictions help businesses, investors, policymakers, and individuals make informed decisions based on the expected interest rate trends.

The recent forecast indicates that the Federal Reserve is likely to continue raising interest rates in 2022 to combat inflation concerns that have risen due to the significant government spending and supply chain disruptions. The economy’s robust recovery from the pandemic has also fueled inflationary pressures. The Federal Reserve may consider implementing more aggressive measures to ensure price stability and economic growth, with a possible increase in bond tapering.

In conclusion, the forecast from CME’s “Federal Reserve observation” predicts an increase in the Federal Reserve’s interest rates in March 2022. The report also indicates an ongoing upward trend in interest rates over the coming months, with a higher probability of a 50-basis-point interest rate increase by May 2022. The report highlights that the cumulative increase in interest rates is likely to reach 75 basis points, which could have a significant impact on the economy.