NEW YORK (Reuters) - Late-day swings in U.S. federal funds futures implied late on Tuesday that traders see about a 51% chance that the U.S. Federal Reserve will lower key borrowing costs by 25 basis points after the policy-setting committee meets on Wednesday, according to the CME Group’s FedWatch tool.
FedWatch bases its model on the latest futures contract price. The end-of-day slide in the implied probability of a rate cut on Wednesday occurred on just a handful of trades late on Tuesday and as such may not be indicative of a genuine change in market sentiment about the odds of a rate cut.
Still, the probability of a cut has been diminishing this week as futures prices dropped ahead of the Fed’s two-day meeting in Washington. The apparent near-even odds for a cut or no move late on Tuesday compare with futures pricing a 92% chance of a 25 bps cut just a week ago.
Reporting by Rodrigo Campos and Dan Burns; Editing by Chizu Nomiyama