CME's 'Fed Watch' index predicts over 80% likelihood that the Federal Reserve (Fed) will cut rates in September.

This index also indicates that the probability of the Fed maintaining the interest rate unchanged in October is very low, while the likelihood of cumulative rate cuts that month is increasing.

September: 84.1% likelihood that the Fed will cut rates by 25 basis points.

October: The probability of maintaining the interest rate unchanged is only 7.6%.

The probability of cutting rates by 25 or 50 basis points in October is 48.4% and 44.1%, respectively.

What is CME's 'Fed Watch' index and how does it affect the market?

CME's 'Fed Watch' index is designed to reflect market predictions about the Fed's interest rate decisions based on futures contracts.

This index is an important tool for investors and financial experts to assess early trends in monetary policy, thus adjusting strategies in line with fluctuations in the cryptocurrency and traditional financial markets.

Analysis of the probability of the Fed cutting rates in September and October 2023

The latest data shows the Fed has a 15.9% chance of maintaining the interest rate unchanged in September, while the expected cut rate is 84.1% with 25 basis points.

Similarly, in October, the likelihood of maintaining the interest rate unchanged is low, only 7.6%, while the probability of a 25 basis point cut is 48.4% and 50 basis points is 44.1%. This reflects the increasing expectations for the Fed to ease monetary policy to stimulate the economy.

'High rate cut forecasts reflect expectations that the Fed is focusing on economic growth amidst gradually controlled inflation.'

– Jinshi, financial expert, 2023

The impact of the Fed's interest rate forecast on the cryptocurrency market and the global financial system

The Fed's interest rate cuts typically make money cheaper, stimulating investment in various resources including cryptocurrency.

This could create temporary momentum for risk assets to appreciate, while also affecting the USD exchange rate and stock indices, thereby indirectly influencing global economic activity.

Frequently Asked Questions

What factors are used to calculate the 'Fed Watch' index?

The index is based on interest rate futures in the financial market, reflecting general expectations about the Fed's interest rate policy.

How does the Fed's rate cut affect cryptocurrency investors?

Low interest rates enhance liquidity and increase investment flows into cryptocurrency, helping asset prices to trend upward.

What does the cumulative rate cut mean?

This is the cumulative expected level of rate cuts over a period, helping to reflect long-term monetary policy.

How to track updates on the Fed's interest rate policy?

Investors should monitor financial indicators such as 'Fed Watch', official announcements from the Fed, and analytical reports from reputable experts.

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