CME Forecasts Future Fed Rate Cuts Probability

Summary

According to CME’s FedWatch, the probability of a 25 basis point rate cut by the Fed in January 2026 is 24.4%, with a 75.69% chance of rates remaining unchanged. By March 2026, the probability of a cumulative 25 basis point cut is 41.4%, with a 50.5% chance of no change, and an 8.1% chance of a 50 basis point cut.Zhitong+ 2

Impact Analysis

So, they’re basically signaling that while a rate cut isn’t the base case for January, there’s a growing expectation for some easing by March. This is interesting because it suggests the market is hedging against potential economic softness or inflation cooling faster than anticipated. The timing is curious—right after a period of heightened rate cut expectations due to weak employment data and internal Fed debates on inflation credibility. The magnitude of the probabilities indicates a cautious market, not fully convinced of a near-term cut but preparing for it. For the portfolio, this could mean positioning for potential rate cuts by looking at sectors that benefit from lower rates, like real estate or utilities. Also, watch for bond market reactions, as any shift in rate expectations could impact yields and bond prices significantly.