Federal Reserve to increase interest rates by 25 basis points

federalreserve.gov

45 points·scrlk··10 comments

Latest dot plot (page 4, PDF): https://www.federalreserve.gov/monetarypolicy/files/fomcproj...

Of note - no cuts planned for this year.

but fed futures contracts aren’t believing it/pricing it in, right?

Fed funds futures traders are expecting a cut at the July meeting by a slight margin, and a 95% chance of a cut by the December meeting as of tonight.

https://www.cmegroup.com/markets/interest-rates/cme-fedwatch...

71% of a cut by July

91% of a cut by September

95% of a cut by November

Kind of weird that the head chair of the Federal Reserve board comes out and says "no cuts this year" verbatim, and this pricing mechanism you and I look at says the exact opposite?

Also being discussed here: https://news.ycombinator.com/item?id=35264787

What are basis points?

The reason behind "Basis Points" is that saying something has increased by a percentage is ambiguous.

If interest rates are 5% and they are "increased by 0.25%", does that make them 5.25% (adding 0.25% of 100) or 5.0125% (adding 0.25% of 5).

Basis points are supposed to be an unambiguous way of explaining the increase.

It is 1/100 of a percent [1]. Just a different way of saying .25%

[1] https://en.wikipedia.org/wiki/Basis_point

No additional meaning to finance people.

Far less meaningful for the average Joe.

Not "just" a different way, when framed.

Aka bips

Reply on news.ycombinator.com