99% Rate Cut Odds in Election Week?

99% Rate Cut Odds in Election Week?

With both the election and the Fed meeting this week, markets are bracing for increased volatility.

Although a rate cut is widely anticipated, Fed Chair Powell and officials are expected to avoid commenting on the next administration’s policies until after the election winner takes office, focusing instead on how policies materialize and affect the economy.

With both the election and an upcoming Fed meeting in focus, markets could face a surge in volatility this week.

According to the CME Group’s FedWatch Tool, traders are placing a 99% probability on a quarter-point rate cut at the conclusion of the Fed’s policy meeting on Thursday, following a half-point cut in September.

After the rate decision, Fed Chair Jerome Powell is expected to speak. But, even if Thursday brings a clear election outcome, Fed officials are likely to sidestep any questions about potential policies from the next administration until the winner assumes office. Only then will they assess how campaign pledges translate into actual policy, watching closely to see how businesses, consumers, and financial markets react before making any further moves on monetary policy.