Fed meeting minutes: Option pricing suggests one to two rate cuts this year

Odaily Planet Daily reported that the minutes of the Federal Reserve meeting pointed out that the baseline policy path implied by option prices (representing the mainstream market expectations) moved slightly downward during this period, indicating that there may be 1 to 2 interest rate cuts (25 basis points each) by the end of the year - only slightly more than expected at the March FOMC meeting. The option-implied probability distribution of year-end interest rates has shifted to the left, and the downside risk has significantly increased. As the market believes that the downside risks of the policy interest rate have intensified, the expected policy path implied by the futures market has been adjusted downward by a larger margin, indicating that there may be about three interest rate cuts before the end of the year. The median benchmark interest rate path shown by market expectation surveys has not changed much, and still indicates 2 to 3 rate cuts this year. However, the survey pointed out that the differences among respondents on the most likely policy path are widening. (Golden Ten)