Fed funds futures sees a ~42% probability of the Fed cutting rates by 50 bps at their 31 July monetary policy meeting
The increased odds definitely has part to do with New York Fed president John Williams' dovish remarks yesterday but even if you look back to pricing back on Wednesday, Fed funds futures have odds of a 50 bps rate cut pinned at ~35%.
Despite some pullback from the ~60% probability priced in right after William's remarks, the odds point towards the decision being closer to a coin flip between a 25 bps and 50 bps rate cut rather than a "small chance" of the latter happening.
In my view, it is inconceivable to imagine the Fed cutting rates by 50 bps this month because that'll mean throwing away a significant chuck of the buffer built up over the past five years only for a "precautionary measure".
But one side of the argument may be that a 25 bps rate cut has been telegraphed and priced in for so long now that the very decision to act on that will have almost no impact considering how rates/markets have already reacted.
So, if the Fed is truly going for an impact play, they may very well opt for a 50 bps rate cut. But as mentioned above, can they really afford to throw away two out of the nine (~22%) rate hikes since December 2015 just because of a little blip in the data?
