Fed rate cut likely as election approaches

As the 2024 U.S. presidential election nears, financial markets are closely watching the Federal Reserve’s upcoming rate decision, scheduled just two days after Election Day on November 7. 

According to the CME’s Fedwatch tool, there is a 99% probability of a quarter-point cut in the federal funds rate, a key benchmark influencing interest rates nationwide. 

This anticipated cut reflects widespread market expectations based on futures data, although it’s important to note that forecasts are not guarantees. 

Betting platforms echo this sentiment, with Polymarket bettors assigning an 86% chance for a quarter-point reduction. 

Odds for a larger half-point cut stand at just 5%, while no change holds at 10%. 

Over at Kalshi.com, the betting crowd places an 85% likelihood on a quarter-point cut and a mere 3% chance of a larger adjustment. 

These projections highlight a strong consensus among prediction tools and betting markets. 

Despite the apparent confidence in a rate cut, experts caution against treating these odds as certainties. 

Historical data from the Fedwatch tool shows that economic conditions can shift unexpectedly, impacting rate decisions. 

For example, the tool’s year-end predictions in 2023 did not fully align with the final outcomes due to evolving economic factors. 

The convergence of the election results and the Federal Reserve’s decision underscores the heightened stakes in both the political and financial arenas. 

According to analysts, the election’s impact and the Fed’s monetary policy choices will likely shape public and market sentiment well beyond November 7.