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Want to Know if the Fed Will Raise Rates This Year? Flip a Coin

November 2, 2015, 7:47 PM UTC
Board Of Governors Of The Federal Reserve Hold Open Meeting
Janet Yellen, chair of the U.S. Federal Reserve, attends an open meeting of the Board of Governors of the Federal Reserve with Stanley Fischer, vice chairman of the U.S. Federal Reserve, right, in Washington, D.C., U.S., on Friday, Oct. 30, 2015. According to a Federal Reserve rule that's set to be approved today, the largest U.S. banks would face a $120 billion total shortfall of long-term debt under a Fed proposal aimed at ensuring their failure wouldn't hurt the broader financial system. Photographer: Andrew Harrer/Bloomberg via Getty Images
Photograph by Andrew Harrer — Bloomberg via Getty Images

The probability of a Federal Reserve interest-rate hike by the end of the year has been inching upwards towards the 50-50 mark, according to those tracking the Fed Fund futures prices.

Futures company CME Group is putting the probability of a rate hike at around 47% in its latest numbers, while futures contracts charted by Bloomberg essentially put the probability of a hike at a 50-50 proposition.

The 30-day Fed Fund futures can be used as a guide to predict when the Fed might increase interest rates since the prices are an expression of trader’s views on the likelihood of changes in U.S. monetary policy. CME Group has come up with their own FedWatch tool that helps investors view the probability of a hike through their own calculations.

A December rate hike is a surprising departure from the previous widely-believed period of March, and some economists now believe the sentiment is shifting towards an end-year increase. “The Fed is seriously considering a December rate hike,” Harm Bandholz, an economist at UniCredit in New York, told Reuters. In a Wall Street Journal survey of economists, around 64% of respondents now believe the December meeting will result in the first rate rise in almost a decade.