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The FED will cut.. But not that much!
Fed Funds Interest rate futures can be used to calculate the implied probability of Fed actions at each of the FOMC meetings. A rate cut is widely expected but traders don’t agree in the amount. There is a 66% chance of 50 bps rate cut and 32% probability of just 25 bps.
In my opinion, the Federal Reserve will probably cut just 25 bps in the upcoming Federal Open Market Committee meeting, 25 bps in October and 25 bps in December (Slow and easy). The reason is simple. “Sustained moderation in inflation pressures had yet to be convincingly demonstrated” and a 50 bps has the potential to sustain those pressures and make the subprime problem a bigger one.
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