Although the dot plot clearly represents the movement of the decision-making members of the Federal Reserve, as explained above, the dot plot will only be re-stated every 3 months. However, this period includes the US inflation hitting a new high in 40 years, the Russian-Ukrainian war. If such factors occur, the market will not wait until the next time the dot plot is released to adjust its interest rate expectations. The figure below is a dot plot released in December last year. The original interest rate expectation for the end of 2022 was only 0.75%~1.00%.
The expectations of members were obviously adjusted by the aforementioned events. a Author provided So, how do you know the changes in the market's expectations for interest rates? We usually look at the Fed rate futures market. 30 Day Federal Fund Rate Future The futures are listed on the Chicago Mercantile Exchange (CME) and are a hedging tool for short-term whatsapp list interest rate risks. Because of the continuous trading characteristics, they can instantly reflect the market’s expectations for short-term interest rates. To observe the changes in market expectations, you can directly read CME's FedWatch tool page (extracted from the picture below), and you can see that after this meeting, the market expects the next interest rate decision on May 4, and the probability of one rate hike is 67.1 %, while the probability of a two-yard rate hike is 32.9% (as in the red box).
Therefore, the market believes that the probability of the next rate hike is not low, which shows that the market's view on interest rates is more "hawkish" than the Fed voting members, that is, the speed of tightening monetary policy will be faster! a Author provided However, before the Fed's meeting to announce a rate hike, the market's expectation for the May 4 interest rate decision was that the probability of one rate hike was 48.1%, and the probability of two rate hikes was as high as 50.5% (as shown in the green box above) . This means that the market was more hawkish before yesterday's meeting and slightly corrected after yesterday's meeting. So what are the expectations for interest rates at the end of the year? We can click on different tabs in the FedWatch tool page to display the expectations for each interest rate decision this year, and click on the tab on December 14 this year (as shown below).