3/22, 1:40 PM (Source: TeleTrader)
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Markets set 48.3% chance of US rate cut this year

A broad selloff on Thursday in stock markets, prompted by downbeat macroeconomic updates from Japan and the Eurozone, came together with an increase in the perceived probability that the United States Federal Reserve would opt to actively ease monetary policy. Last week its so-called dot plot indicated no change in interest rates through the end of 2019. Treasuries spiked and the spread between three-month and ten-year yields threatened to close and invert. Historically, the phenomenon in the curve was a precursor to many recessions in the US.

The FedWatch tool, with which CME tracks fed fund futures, showed bets at 8:26 am ET of 51.7% that the central bank's benchmark rate range would still be between 2.25% and 2.5% after the final meeting of the year concludes on December 11. The measure tumbled 11.3 percentage points since yesterday and a whopping 37.4 points from one month ago.

The markets priced in one cut by 25 basis points, a standard move, at 36.6%, while 10.2% pointed to two moves lower. It left a 1.4% chance for a drop that would land the main rate at 1.5% to 1.75% and even a marginal 0.1% for four decreases. There were virtually no investments counting on a hike, meaning cuts were penciled in by 48.3%.

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