Market sees Fed rate cut all but certain

The markets expect the Federal Open Market Committee to lower the upper limit of fed funds rate to 1.75% with almost certainty when Wednesday's meeting concludes. A rate cut would mark the third such move in as many meetings as the Federal Reserve weighs current and forward-looking economic growth concerns.

Current probabilities favor rates to stay unchanged following the FOMC's December meeting. However, much can change in six weeks and those odds may shift should signs of weakening persist. Year-over-year nominal U.S. GDP growth was 3.7% as of Sept. 30, down from 5.8% a year earlier.

The casual viewer might not see economic slowdown after a brief look at equities. The S&P 500 is up 5% over the past four weeks and breached the 3,000 mark earlier this week to a new high. Forward earnings, while still comparatively high relative to history, have been slowing throughout much of 2019, adding to concerns about the year ahead.

CME Group calculates the probabilities based on price levels of 30-day futures contracts and assume rate change intervals of 0.25%. Probabilities shown represent what the fed funds rate will be at the conclusion of a given meeting.