The Fed’s October Interest Rate Forecasts Have Been Released—Here Are the Probabilities

Following the Fed’s 25 basis point rate hike at its September meeting, markets are already focused on the October meeting. According to current market pricing, investors are giving a 45% probability to a 25 basis point rate hike by the Fed in October.

In the pricing of the forecast markets, the probability of the Fed keeping interest rates unchanged at its October meeting stands out as the most likely scenario with 55%. However, the fact that the probability of a 25 basis point increase has reached 45% indicates that expectations for the next meeting are almost evenly divided in the market.

In less likely scenarios, a 25 basis point rate cut is priced at around 4%, a 50 basis point or greater rate increase at around 2%, and a 50 basis point or greater rate cut at around 1%.

The dot plot, published after the Fed raised its policy interest rate to the 3.75-4.00 percent range at its last meeting, also indicated that another interest rate hike may be on the agenda before the end of the year.

*This is not investment advice.

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