Traders rush away from wagers on a half-point July Fed rate cut

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Traders rush away from wagers on a half-point July Fed rate cut
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[NEW YORK] Traders on Friday rushed away from bets that the Federal Reserve will slash rates by a half-point this month, a day after clamouring for them. Read more at The Business Times.

Traders on Friday rushed away from bets that the Federal Reserve will slash rates by a half-point this month, a day after clamouring for them.[NEW YORK] Traders on Friday rushed away from bets that the Federal Reserve will slash rates by a half-point this month, a day after clamouring for them.

Rates spiked across short-end markets, while the dollar climbed to a session high. The implied yield on the August fed funds contract - which indicates where the market sees the central bank's key rate after its July 31 decision - surged 8.5 basis points to around 2.10 per cent. With the current effective fed funds rate at 2.41 per cent, the market is now pricing in 31 basis points of easing for the upcoming meeting.

That suggests traders see a 25-basis-point cut as more likely than something larger. On Thursday, a reduction twice that size was seen as more probable. The market started backtracking after the New York Fed decided to walk back some earlier comments by President John Williams that had been perceived dovishly, and the move gained further momentum following a Wall Street Journal article suggesting that the central bank was signalling a smaller reduction. The story didn't cite new public comments from policy makers.

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