CME shows 92% no-change odds

Interest-rate markets are telling a simple story right now — don’t expect a June cut. CME FedWatch on May 7 shows traders putting the overwhelming odds on the Federal Reserve leaving its policy rate unchanged at the June 16–17 meeting. That is the news. The bigger point is what changed underneath it: hopes for quick cuts have faded because inflation got sticky again, and energy is a big reason why. ### What is CME FedWatch actually showing? It’s not a poll and it’s not the Fed whispering through a back channel. It’s a market-implied read from 30-Day Fed Funds futures — basically, traders betting on where the fed funds rate will land after upcoming meetings. On May 7, the tool showed the June meeting as a near-lock for no change, with roughly a 94% probability of a hold and about a 6% chance of a 25-basis-point cut. CME’s own page frames FedWatch as a probabilities tool built from fed funds futures pricing. (cmegroup.com) ### Where are rates now? The Fed held its target range at 3.50% to 3.75% at the April 28–29 meeting. That part matters because June is not a fresh debate from scratch — it’s a question of whether the data since late April has been weak enough on jobs or cool enough on inflation to justify moving. So far, markets are saying no. (federalreserve.gov) ### Why did cut odds fall back? Inflation stopped looking comfortably on-track. March CPI rose 0.9% on the month and 3.3% from a year earlier. Core CPI was softer at 0.2% monthly and 2.6% yearly, but the headline number got pushed up hard by energy. Gasoline alone jumped 21.2% in March, and th(federalreserve.gov) will wait rather than risk cutting into another price shock. (bls.gov) ### Why does energy matter so much? Because energy is the annoying part of inflation that can spread fast. Gas gets more expensive, shipping gets pricier, airline tickets feel it, food distribution feels it, and inflation expectations can get nudged higher too. The Fed’s April statement said inflation was elevated “in part” because of the recent increase i(bls.gov)l-bank language for: yes, we noticed, and no, we’re not eager to look through it yet. (federalreserve.gov) ### Is this just about inflation? Not entirely. It’s also about the bar for cutting. The labor market has cooled from hotter levels, but it has not cracked in a way that forces the Fed’s hand. And when inflation is still above target, a merely decent labor market is enough to keep the committe(federalreserve.gov)ier in the year. (federalreserve.gov) ### What are bonds saying? Longer-term yields have stayed fairly firm. The 10-year Treasury yield was around 4.33% to 4.43% in the latest readings around this week. That is not a market screaming recession and emergency easing. It’s more like a market adjusting to the idea that rates may stay restrictive for longer than traders hoped a few months ago. (fred.stlouisfed.org) ### So what should people take from this? The Fed has not promised another hold in June. But markets are acting like a June cut would now require a real downside surprise in inflation or jobs. Until that happens, the base case is simple: unchanged in June, and a much slower easing path than rate-cut optimists wanted. ### Botto(fred.stlouisfed.org)y-cut assumptions. June now looks like a hold because inflation — especially energy-driven inflation — gave the Fed a reason to stay patient. (federalreserve.gov)