Interest rate futures are beginning to shift back in the less dovish direction, following the release of Fed’s minutes from the December meeting on Wednesday that provided little to no indication of when the pivot will come this year.
The markets ended 2023 with a high possibility for six rate cuts in 2024, while there was a small chance to go beyond seven or even eight cuts. However, after the Fed’s minutes on Wednesday and the report of job data yesterday, probability for rate cuts that tops rate hold was halved to three with a chance that it could go up to five to six. Meanwhile, the Fed’s dot plot indicated three cuts.
Expectations for interest rate cut from the Federal Reserve in March and 2024 is waning, following ADP jobs added more than expected, while slowing wage growth and initial jobless claims were at 2023 lows.
According to the CME FedWatch Tool, the probability for a rate cut in March dropped from 70% at the end of 2023 to 60% yesterday.
This is before tonight’s non-farm payrolls for December, which is expected to drop to 170,000 from nearly 200,000 in November.
