FOMC Decision Sparks Higher Hiking Expectations, Probability of Rate Cuts Falls

According to CME's "FedWatch": The probability of the Fed maintaining rates unchanged by July is 64.0% (down from 91.0% prior to the decision), the probability of a cumulative 25-basis-point hike is 35.1% (up from 8.9%), and the probability of a cumulative 50-basis-point hike is 1% (up from 0%); the probability of the Fed maintaining rates unchanged by December is 14.2% (down from 38.2%), the probability of a cumulative 25-basis-point hike is 36.4% (down from 43.0%), the probability of a cumulative 50-basis-point hike is 33.8% (up from 16.2%), the probability of a cumulative 75-basis-point hike is 13.5% (up from 2.4%), and the probability of a cumulative 100-basis-point hike is 2.1% (up from 0.1%). AI Analysis: Market pricing following the Fed’s rate decision has undergone a dramatic recalibration, with significantly heightened expectations for rate hikes. Investors have substantially lowered the likelihood of rate stability and are now betting on a more aggressive tightening path. This shift directly reflects the market’s reassessment of the monetary tightening cycle, reinforcing expectations that high interest rates will persist longer. The rapid reallocation of capital indicates that markets are absorbing the prospect of more severe liquidity pressures, exerting direct downward pressure on risk assets.