The market has penciled in a possible hike in July, otherwise, no significant action until November. This is a much tougher forecast than the rate cut view on May 3.

Freepik

Data from CME Fedwatch, calculations by Mish.

According to CME Fedwatch, the single most likely action by the Fed is a pause all the way until a rate cut at the November meeting. But the path isn't necessarily a flat one.

Odds of 5.00 Percent to 5.25 Percent 

• June 14: 81.5% 
• July 23: 80.6%
• September 23: 55.9%
• November 1: 20.9% 

Across the board, the market has penciled in a much tougher Fed than immediately following the last FOMC meeting.

The lead chart shows the weighted average of market bets. The market has penciled in a rate hike in July then a cut in September. 

Nonetheless, the market still anticipates an aggressive path of rate cuts starting in November and continuing in 2024.

What About the Debt Ceiling and Possible Default?

For now, the market seems little concerned about the possibility of a default. Neither am I. 

Addendum

Minutes after I finished the post, the market took back odds of a hike in July. 

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