FOMC Week + Futures Trading Levels for 6.14.2022
Posted By:- Ilan Levy-Mayer Vice President, Cannon Trading Futures Blog
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By John Thorpe, Senior Broker
Federal Funds rate, the DOT Plot and CPI vs PCE
Wednesday , June 15th the U.S. Fed will release it’s guidance on short term interest rates in lieu of recent inflationary measures. One of the purposes of markets is to discount the potential for future events. When a rate announcement is made, price action in markets affected by the change tend to be muted. Conversely, a surprise announce will create more volatility in both directions as bids are cancelled, removing price floors or offers are cancelled removing price ceilings.
Here are some fascinating tools that are available to the novice and professional alike. If you have any questions about how to use them or read them please call your CannonTrading broker @ 800-454-9572.
First here is a snapshot of the consensus from
There is a futures contract based on the FOMC Fed Funds rate and it’s the 30 Day Federal Fund Futures
contract, listed monthly ZQN22
will be the July FF Futures contract.
Please pull up the quote and feel free to trade this liquid contract.. The market prices actually reflect the probability of future rate changes. As most of us are aware, the Fed is currently in a rate hike mode and shouldn’t surprise you to know that by hiking short term interest rates, that’ should reduce the supply and appetite for cheap dollars. By raising rates, the fed would like to influence consumption of goods and services to stop the trend of inflationary price hikes across the broad economy.
The Fed has suggested during previous guidance that they key off of the PCE ( Personal Consumption Expenditures Price Index ) rather than the CPI (consumer Price Index) to base rate change decisions upon. A description of the differences can be found here https://www.bls.gov/osmr/research-papers/2017/st170010.htm
And Finally the CME has a wonderful “probalistic” tool called the “Fed Watch Tool” you will find the DOT Plot, probabilities of future rates all the way out to July 2023
Plan your trad and trade your plan.
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Posted in: Financial Futures | Future Trading News