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Market expects 25 basis-point cut

Market participants overwhelmingly expect a 25 basis-point cut from the Fed at this month’s policy meeting on July 30–31. A recent Reuters poll of economists found that over 95% of 111 economists predict a 25 basis point cut. Only a small minority of those polled expected a 50 basis point reduction, according to Reuters.

  • Reading the tea leaves: Fed fund futures prices now show investors see just a 14% chance the central bank cuts rates by 50 basis points to a range of 1.75 –2.00%. 
  • Heard on the Street“The biggest reason for the Fed to cut rates is because it has been priced into the markets for a while now. If they didn’t follow through and cut, it would cause a bit of a shock. I think the recent general message from the Fed seems to be that it’s more about downside risks to growth rather than the economy being already weak.” 
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