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Probabilities for Interest Rate Change by the US Federal Reserve

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Probabilities for Interest Rate Change by the US Federal Reserve

According to CME’s “Federal Reserve observation”, the probability of the Federal Reserve keeping interest rates unchanged in March is 32.1%, the probability of raising interest rates by 25 basis points to the range of 4.75% – 5.00% is 67.9%, and the probability of raising interest rates by 50 basis points to the range of 5.00% – 5.25% has dropped to 0%; The probability of a cumulative interest rate increase of 50 basis points by May is 55.2%, the probability of a cumulative interest rate increase of 75 basis points to 5.25% – 5.50% is 24.2%, and the probability of a cumulative interest rate increase of 100 basis points to 5.50% – 5.75% is 0%.

The probability that the Federal Reserve will keep the interest rate unchanged in March is 32.1%

Analysis based on this information:


According to the CME’s “Federal Reserve observation,” the likelihood of the US Federal Reserve Reserve’s interest rate actions in March and May, reveals insights about the future of the American economy.

As of March, there is a 32.1% chance that the Federal Reserve will maintain the present interest rates with no increment. However, the possibility of a 0.25% rise in interest rates to the range of 4.75% – 5.00% is at 67.9%. Notably, the possibility of a 0.5 % increase to a range of 5.00% – 5.25% is at zero. These numbers suggest that the US economy is probably growing, but significant hikes can potentially harm it and impede economic advancement.

For May, the CME’s Federal Reserve observation reveals that there is a 55.2% likelihood of an aggregated interest rate surge of 0.5%. Concurrently, probability drops to 24.2% for an immense cumulative increase of 0.75%. Lastly, the prospect of a 1% aggregated interest rate hike to the range 5.50% – 5.75% is zero.

The probability of an interest rate hike in March is significantly more imminent than the possibility of one in May. Though the Federal Reserve aims to find a balance between its economic goals (maintaining low inflation and employment) and its mandate, the economist stance in raising interest rates suggests that the American economy is steadily advancing. The increase in interest rates is necessary to balance the economy and avoid inflation problems.

However, the CME observation reveals a noteworthy causal relation that an excessive rise in interest rates can harm the economy’s growth. Accordingly, a gradual increase is more practical than a significant and sharp increase.

Overall, the CME Federal Reserve observation of the probability of interest rate increments offers a better understanding of the US economy’s future. The observation may be beneficial to policymakers, investors, and other stakeholders as data analytics back policymaking decisions, reducing assumptions to optimize growth.

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