The approach behind the CME FedWatch Tool uses the prices of fed funds futures contracts to estimate the likelihood of rate changes. It does this by calculating the 30-day federal funds rate implied by the futures contract and comparing this with the target rate set by the FOMC. The resulting...
In the FedWatch tool’s probability analysis, the implementation assumes that the size of a rate change is always 25 basis points and that for a given FOMC meeting month, prior or post FF futures contract prices contain information that either is independent of the outcome of that meeting or ...
CME Group’s online “FedWatch” tool lets traders dynamically monitor the market’s evolving rate-change expectations, which can shift very swiftly in response to new data. For instance the May 2015 non-farm payrolls addition of 280,000 jobs led futures markets to bring forward rate-hike ...