Polymarket Traders See 32% Chance of No Fed Rate Cuts This Year

The chance that the US Federal Reserve (Fed) will not adjust interest rates this year is becoming more likely.

On Polymarket’s blockchain betting platform, the likelihood of the Fed maintaining the benchmark interest rate between 5.2% and 5.5% by year-end is currently estimated at 32%. This represents a noticeable shift from the previously assessed probability of 7%, which was determined just over a week ago.

Meanwhile, punters see a 27% probability of a 25 basis points (bps) rate cut.

Since mid-March, the primary cryptocurrency’s price growth has slowed down noticeably. It now hovers between $60,000 and $70,000.

In simpler terms, the cautious pricing on Polymarket aligns with typical markets as traders now anticipate only two small interest rate decreases in 2024 instead of the earlier predicted six. Bank of America has adjusted its forecast for the first Fed rate reduction from June to December, while Societe Generale believes the Federal Reserve will not implement any rate cuts until 2025.

No urgency to cut rates

About a month ago, it was widely believed among financial markets and policy makers that inflation would keep decreasing in the next few months, giving the Federal Reserve the opportunity to reduce interest rates significantly during the second half of the year.

Recently released figures, specifically the robust job creation in March and unexpected rise in inflation, indicate a third consecutive increase in living expenses. These new data points have cast doubt on the need for an imminent reduction in interest rates.

“According to Noelle Acheson, author of the Crypto Is Macro Now newsletter, there doesn’t seem to be a conventional reason for the U.S. Federal Reserve to make rate cuts at this moment. The employment market is robust, retail sales have surpassed expectations, Q1 GDP growth is predicted to be similar to Q4, and inflation remains persistent. Even Fed Chair Powell, who earlier hinted at imminent cuts, now seems to be considering keeping rates high for a longer period than initially anticipated.”

On Tuesday, Jerome Powell, the Federal Reserve chairman, announced that inflation is back in the American economy, implying that possible interest rate reductions might be postponed for a while.

On Thursdays, New York Federal Reserve President John Williams expressed his disagreement with the need to lower interest rates, stating, “I personally don’t feel compelled to reduce rates at this time” due to the robust state of the economy.

In his remarks at the Semafor World Economy Summit in Washington, Williams expressed his belief that eventually, interest rates will have to be reduced. However, he added that the exact moment for this adjustment depends on the state of the economy.

Atlanta Federal Reserve Bank President Raphael Bostic expressed his readiness to wait, suggesting that it’s probable that the initial rate reduction will occur towards the end of the year.

Mary Daly, the president of the Federal Reserve Bank of San Francisco, made a statement on Monday that mirrored this idea: “It’s best not to take hasty action when there’s no need for haste.”