U.S. interest rate swaps indicate traders expect a 100% probability of a rate cut at the Federal Reserve's September meeting.
The overnight index swap contracts linked to the Federal Reserve's meeting fully priced in the expectation of a 25 basis point rate cut at the September Federal Open Market Committee meeting late Wednesday, with heavy trading in federal funds futures contracts. Before 3 PM New York time, trading was active in August and October federal funds futures contracts, and there was significant trading in the guaranteed overnight financing rate futures for the September 2025 contract. As a result, the OIS rate linked to the Fed's September policy meeting fell to an intraday low, close to 4.08%, indicating a 100% likelihood of a 25 basis point cut. From the further end of the swap curve, the market currently expects a total of 62 basis points of cuts over the remaining three FOMC meetings this year, up from 59 basis points at Tuesday's close.