This morning's domestic news reports stated,
"The probability of a September interest rate hike is 87.3% according to the CME FedWatch."
So, I looked into CME FedWatch, which presented this probability.
FedWatch is a tool developed by the CME Group that estimates the probability of the Federal Reserve (Fed)'s benchmark interest rate decisions in real time based on the prices of federal funds (FF) futures contracts.
* The 87.3% probability of an interest rate hike can be understood as a representation of market participants' collective bets on the Fed's interest rate decision as a probability.
CME FedWatch is said to have accurately predicted past Fed interest rate decisions. haha
Recent research analyzed the prediction accuracy of CME FedWatch for FOMC decisions and found it to be approximately 88% accurate 30 days before the meeting.
Because of this high hit rate, the market has seen a lot of news reports this morning that have progressed from,
“There is a possibility of a hike” → “A hike is likely” → “A hike is almost priced in”
.
Miracle of pricing in!!!
If there is a 12.7% chance that interest rates will remain unchanged, we might see a bull market today.
▶ Original source: https://n.news.naver.com/article/421/0009167598
▶ Original source: https://www.cmegroup.com/ko/markets/interest-rates/cme-fedwatch-tool.html
