How Fast the Rate Outlook Flipped

A lot of uncertainty still persists as the world is changing fast and outcomes are repricing rapidly. Below is a chart from JP Morgan showing this dynamic. It compares market expectations as of February 27th to March 26th for major central banks¹ related to raising or lowering interest rates by their respective June meetings. For example, on February 27th the market was implying the Fed would lower rates by 0.635 cuts by June, and today the market is implying 0.213 hikes. To translate that into Polymarket English, on 2/27 there was a 39% probability the Fed would cut rates by 0.25% in June and now there is a 16% probability the Fed hikes rates by 0.25%².

What’s notable to us is that not only has the assumption of the magnitude of the outcome changed, but the direction of the outcome has changed all together.

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1. The banks listed in the chart are the Federal Reserve, European Central Bank, Bank of Japan, Bank of Canada, Bank of England, and Reserve Bank of Australia.
2. Based on data analyzed using Bloomberg’s financial analytics tool. These probabilities are intended only to represent the market’s consensus expectations at a given point in time, are hypothetical in nature, and are not direct forecasts or guarantees of future events. All probability estimates are approximate, subject to change, and dependent on the assumptions and methodologies embedded within Bloomberg’s analytical models and the underlying market data.