Federal Reserve Meeting Minutes: Options Pricing Suggests One to Two Rate Cuts This Year
According to a report by Jinse Finance, the Federal Reserve's meeting minutes indicated that the baseline policy path implied by option prices (representing the market's mainstream expectations) slightly shifted downward during this period, suggesting a potential rate cut of 1 to 2 times (25 basis points each) by the end of the year—only slightly more than the expectations during the March FOMC meeting. The probability distribution of year-end rates implied by options has shifted to the left, with significantly increased downside risks. As the market perceives an increased risk of policy rate cuts, the expected policy path implied by the futures market has been adjusted downward more significantly, indicating approximately three rate cuts before the end of the year. However, the median baseline rate path shown by market expectation surveys has changed little, still suggesting 2 to 3 rate cuts this year. The survey noted that the divergence among respondents regarding the most likely policy path is widening.
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