Many of you guys likely already know about this, but I wanted to share this for those who have not heard of this tool.

Link: https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html

This tool is a great way to determine how big of a rate hike the market has priced in already. Obviously it’s not a PERFECT indicator, but it’s still very helpful.

You can see the current target rate is 150 – 175 bps and this tool shows that there’s a 77.5% the new target rate will be 225 – 250 bps (implies a 75 bp rate hike…really spelling this out for you guys lol). So if we end up getting a surprise 100 bp hike, I would imagine the market will respond poorly. You can also click through to see what the market has priced in during previous weeks/months (check out the Compare tab). It’s a pretty neat tool.

Of course the rate hike isn’t the ONLY important thing we’ll hear. The verbiage used in the FOMC statement (specifically any changes to the statement compared to prior month) could also have big implications. And Jay Powell also does a press conference and in the past we’ve seen his answers to questions in that press conference dramatically impact the market…although I imagine he tries to avoid causing any ripples in the market during those meetings.