"The Fed will cut in January as well"... US rate cut bets increase

Expectations are growing that the Federal Reserve (Fed) will cut interest rates again in January next year, following this month, leading to a significant increase in bets in the futures and swap markets.

According to Bloomberg, traders in the relevant markets are betting that the Fed will cut rates consecutively until January next year, bolstered by predictions from the major U.S. investment bank Morgan Stanley.

Morgan Stanley recently reported that the Fed is likely to cut rates consecutively this month and in January next year, recommending that investors position themselves accordingly. Specifically, they advised buying February federal funds rate contracts and accepting the January overnight index swap rate on the premise of a rate cut, as the Federal Open Market Committee (FOMC) meeting is scheduled for January 29 next year.

As a result, the prices of January and February rate futures contracts have surged, along with a sharp increase in transactions.

Matthew Hornbach, a strategist at Morgan Stanley, said, "Investors believe that the Fed is likely to cut rates not only in December but also in January next year and should position themselves accordingly."

Currently, the rate futures market sees an 80% chance of the Fed cutting rates on the 18th of this month. This is significantly higher compared to 64% before the November employment figures were released.

Meanwhile, the U.S. consumer and producer price index data for November is scheduled to be released on the 11th and 12th of this week. This data is expected to have a significant impact on the Fed's future monetary policy decisions.

Hyun-Kyung Kim, khkkim@wowtv.co.kr