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CME FedWatch Tool uses fed funds futures to estimate daily odds of a 25‑ or 50‑basis‑point Fed rate move, helping traders gauge policy expectations.
The CME FedWatch Tool now shows a 73% probability that the Federal Reserve will keep rates unchanged at its next meeting, up from 58% a week earlier, highlighting market confidence in a pause after recent data surprises【1】. This matters because the tool’s odds directly influence pricing of Treasury yields, the dollar, and equity risk premiums.
| At a glance | |
|---|---|
| Probability of no rate change | 73% |
| Prior probability (one week ago) | 58% |
| Rate‑move scenarios covered | 25 bp & 50 bp |
| Market impact | Treasury yields slipped 4 bps; S&P 500 rose 0.6% |
The FedWatch Tool translates the price of CME‑traded fed funds futures into an implied 30‑day federal funds rate. Because futures prices are quoted as 100 minus the implied rate, a higher price signals a lower expected rate and vice‑versa. The tool then compares this implied rate with the Fed’s target range to assign probabilities for a hold, a 25‑basis‑point hike, a 50‑basis‑point hike, or a cut【1】. Updates occur daily, reflecting the latest market sentiment as new macro data, Fed speeches, or geopolitical events shift expectations.
When the probability of a hold rose to 73%, Treasury traders priced in a lower chance of a hike, pushing the 2‑year yield down about 4 basis points. The weaker yield outlook lifted equity valuations, with the S&P 500 gaining roughly 0.6% on the day. The dollar index also slipped modestly as investors adjusted carry‑trade positions in response to the reduced upside for short‑term rates【1】.
The FedWatch Tool’s rising confidence in a rate pause underscores how tightly markets tie futures pricing to policy expectations, but the next data points and Fed commentary will determine whether that confidence holds or erodes.
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AI-assisted synthesis by the TrendWatcher Editorial Desk · sourced from 2 outlets · Jul 9, 2026 · How we report
The federal funds rate is currently set at a target range of 3.50% to 3.75%.
Officials worry that the massive buildout of AI infrastructure, including demand for semiconductors and electricity, could keep inflation elevated.
Kevin Warsh is the current Chair of the Federal Reserve, having been appointed by President Donald Trump to replace Jerome Powell.
The Fed primarily uses the Interest on Reserve Balances (IORB) and other tools like the overnight reverse repurchase agreement facility to keep the effective rate within its target range.