Interest rate option traders increase their bets on the Federal Reserve cutting rates by 50 basis points this month

Interest rate option traders have increased their bets on the Federal Reserve cutting interest rates by 50 basis points this month, reflecting growing market speculation that policymakers will take proactive measures to prevent the economy from falling into trouble. Currently, swap contracts show that there is about a one-third chance of the Fed cutting rates by 50 basis points this month. Options linked to the Secured Overnight Financing Rate (SOFR) show a significant increase in open contracts (i.e., positions held by traders) in some bullish contracts expiring on September 13th. September 13th is five days before the FOMC issues its interest rate statement. If this Friday's non-farm employment report and next week's Consumer Price Index (CPI) data show that both job market and inflation are cooling down, it would be enough to justify a quicker easing policy from the Fed, then these positions will be rewarded.