With only six days to go before the U.S. Federal Reserve's Federal Open Market Committee (FOMC) meeting, market expectations for a rate cut are strengthening. According to the CME Fedwatch tool, as of 11 a.m. EDT on September 12, the market assigns an 87% probability to a 25 basis points (bps) rate cut, while a 50 bps cut stands at just 13%. The tool accurately reflects implied interest rate expectations by comparing futures prices with the current target range set by the Fed.
The FOMC Meeting and the Federal Funds Rate
The FOMC meeting scheduled for September 18, 2024, will determine the next move for the federal funds rate—the rate at which commercial banks lend and borrow excess reserves overnight. This rate directly influences mortgage rates, lending rates, savings accounts, and credit card rates across the economy. The Fed adjusts this rate to achieve its dual mandate of maximum employment and price stability.
Polymarket Data Confirms Consensus
Meanwhile, decentralized prediction market Polymarket shows strong agreement with the CME data. A $25 million betting pool indicates a 98% probability of a rate cut on September 18, with 92% odds for a 25bps cut, 7% for a 50bps cut, and just 2% for no cut at all. This suggests market participants have formed an overwhelming consensus on the direction of monetary easing, though the magnitude remains slightly uncertain.
Impact and Market Outlook
If the Fed delivers a 25bps cut, it would mark the first easing move of the current tightening cycle. Such a decision could lower borrowing costs, stimulate economic activity, and provide liquidity support for risk assets, including cryptocurrencies. However, lingering inflation pressures may lead the Fed to proceed cautiously. As the countdown continues, global financial markets will closely watch the final decision and any guidance on future rate paths.
Historically, rate cuts have often boosted risk-on assets like Bitcoin, as lower interest rates reduce the opportunity cost of holding non-yielding assets. Yet, much of this expectation may already be priced in, with actual market reaction dependent on the statement's tone and the dot plot projection.