Fed Rate Hike? Forget It. Rate Cut Probability Rising

Takeaway: Fed funds futures now show a 12% probability of a rate CUT in September.

Fed Rate Hike? Forget It. Rate Cut Probability Rising - rate hike cartoon 11.17.2015

 

The market is saying no Fed rate hike in 2016. In fact, rate cut probabilities just rose (even if just marginally). This is a complete breakdown in the central planning belief system.

 

Take a look at the implied probabilities in Fed Funds futures, 0% chance of cut through November and only 11% through February 2017. Meanwhile, rate cut expectations for September sit at 12%. Just yesterday, markets saw a greater than 50% probability of a hike in December. 

Today

 

Fed Rate Hike? Forget It. Rate Cut Probability Rising - fed prob rate cut

6/23/16

 

Fed Rate Hike? Forget It. Rate Cut Probability Rising - fed rate hike prob 6 24

 

But no worries, right? The Fed has got this. Here's the Fed's post-Brexit statement this morning:

 

"The Federal Reserve is carefully monitoring developments in global financial markets, in cooperation with other central banks, following the results of the U.K. referendum on membership in the European Union. The Federal Reserve is prepared to provide dollar liquidity through its existing swap lines with central banks, as necessary, to address pressures in global funding markets, which could have adverse implications for the U.S. economy."

 

What happens if the market no longer believes that central planners can save the day?

 

We've been saying that for a while now and reiterate that call today...

 

The central planning #BeliefSystem is breaking down.

 

(Click here to watch our post-Brexit analysis from renowned European economist and market strategist Daniel Lacalle and Hedgeye CEO Keith McCullough in this morning's The Macro Show.)