Understanding Fed Rate Decision Probabilities

Federal Reserve rate decision probabilities show what the market expects for the next monetary policy meeting — a hike, a cut, or no change to US benchmark rates. These probabilities are derived from real market prices, not from an opinion poll.

Where these probabilities come from

Traders taking positions in interest-rate futures are effectively "voting with their money" on what they expect. By observing the price of these contracts, you can back out the implied probability the market assigns to each possible scenario for the next meeting — a 25-basis-point hike, no change, a cut, and so on.

Why it matters for markets

Equity, bond and currency markets rarely react to the decision itself, but to the gap between the actual decision and what was already priced in. A rate hike that was widely expected (90% probability) surprises no one and moves markets little. The same hike, if the market had only priced it at 30%, can trigger a sharp reaction.

How to read a probability table

For each upcoming meeting, several rate scenarios are shown with their respective probability. The probabilities for a given meeting always sum to 100%. The scenario with the highest probability is the "dominant scenario" — the one the market sees as most likely, without being guaranteed.

Limitations to keep in mind

• It changes continuously — every major new economic data point (inflation, employment) can move these probabilities significantly from one day to the next.
• The market can be wrong — these probabilities reflect the market's collective opinion, not a certainty about what the Fed will actually do.
• Near-term horizon is more reliable — probabilities for the very next meeting are generally more reliable than those several meetings out.

Sources and data

• FRED INSTITUTIONAL SOURCE — Federal Reserve Economic Data
• investing.com DATA PROVIDER — market expectations

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