Fed funds futures traded on the Chicago Board of Trade, part of CME Group, are showing rising expectations that Federal Reserve officials will cut the overnight interbank lending rate by a half-point when they meet on Jan. 29-30.
The CBOT futures contract now shows 66% odds the Fed will lower the 4.25% benchmark rate by 50 basis points and only a 33% chance the rate cut will be by 25 bps.
On Friday, following a weak employment report for December, fed funds futures showed a 55% chance of a half-point move. This was a jump from 25% odds on Wednesday, after news of contraction in the manufacturing sector. Prior to that report, Fed funds futures had priced in a 100% chance of a 25-point cut and no chance of a greater move.
The Fed also announced Friday it will inject $30 billion in the banking system on Jan. 14 and $30 billion on Jan. 28 through two 28-day auctions to relieve tight lending conditions in short-term credit markets.