Odds of a Fed Rate Cut By Halloween Rising After Hitting Zero

 |  Includes: DIA, IVV, SPY
by: Bespoke Investment Group

Hickey and Walters (Bespoke) submit: As investors get back into Fed watch mode ahead of tomorrow's rate decision, now is a good time to check what expectations are heading into the meeting. Several weeks ago, we highlighted how the market is often incorrect in its assessment of future Fed policy. However, given that so much attention is focused on the subject, it is important to know what the consensus is forecasting.

Two weeks ago, the odds of a rate cut by the October 31st meeting had fallen down to zero with some even predicting a hike. Since then though, turmoil in the financial markets has caused investors to increase their bets on a 25 basis point cut. As of this morning, the futures market is implying that there is an 18% chance that the Fed cuts rates to 5% by October.

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