🦧 the watch tool

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not a fan of the ugly chart, but…

in light of the upcoming two-day fed meeting (fomc) that starts tomorrow, today i’ll talk about the cme fedwatch tool

what is the fomc (federal open market committee)?

typically held eight times a year, the fomc when a branch of the federal reserve system convenes and decides on the direction the us’ monetary policy will take (at least until the next meeting)

• i.e. in september, the fed raised the fed funds rate by 0.75% to a target range of 3-3.25%

• the fed funds rate is the rate at which banks borrow from each other overnight

the cme fedwatch tool

these meetings are held in private and are relatively difficult to predict or project out into the future, as an analyst would for a particular company's earnings

• this is where the cme fedwatch tool can come in handy

• the bar chart above is calculated based on how the market (i.e. interest rate traders) is pricing in expectations (more about the methodology here)

so for tomorrow…

it's approximating an 88% chance that the fed meeting (concluding this wednesday) will announce a 0.75% rate hike

• another proxy we can look at to gauge market sentiment is the us 10-year note yield

happy monday!

💡 something im thinking about

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that's all, folks 🐒

as always, i’m no financial advisor! (i’m no substitute for professional financial services)