- The US Federal Open Market Committee's July meeting gets under way Tuesday, and will conclude with the next announcement on interest rates Wednesday afternoon.
- The Fed fund futures forward curve shows us the Fed isn't likely to make a move this month, though continues to indicate two rate cuts are expected during 2024.
- Markets will also be paying attention to what the Fed says Wednesday afternoon, particularly with stock indexes on the cusp of long-term technical reversal patters (more on this later).
As you’ve likely heard by now, the US Federal Open Market Committee’s July meeting kicks off Tuesday and concludes with an announcement on interest rates Wednesday afternoon. A great deal of debate continues about what will be said, though the market is giving us a good indication of what will be done. I joined the conversation with my friend Michelle Rook of Farm Journal late last week.
Nothing. At least not this time around.
The Fed fund futures (ZQQ24) forward curve is a way of looking at market expectations for the Fed fund rate. The easiest way to think of the futures market is by subtracting futures price from 1%, then seeing where it moves above existing or expected expected Fed fund rates.
For example, the July futures contract is sitting at 94.67, meaning the expected interest rate is 5.33% (1% – 94.67). Recall the official Fed fund rate heading into the July meeting is between 5.25% and 5.5%, meaning the July futures contract is not showing an expected rate cute. Further out we see:
- The August futures contract at 94.6825, with an interest rate of 5.3175. Again, no move, even with no FOMC meeting in August
- September futures were 94.795, putting the interest rate at 5.205, below the low end of the existing range
- Meaning the market is looking for a rate cut of 25 basis points at the conclusion of the September meeting (September 18)
- Further out, we see November futures at 95.075, equating to a Fed fund rate of 4.925, below the expected September adjustment to a range of 5.0% to 5.25% meaning another projected cut.
The bottom line is the Fed fund futures market, at least as of Monday afternoon, is still expecting two rate cuts in 2024, down from the three I talked about in March, with more on the way during 2025.
Now we’ll see what the Fed says Wednesday.
On the date of publication, Darin Newsom did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
