This tool estimates the market-implied probabilities of various ranges for the three-month average fed funds rate. Our methodology uses data on three-month Eurodollar futures, options on three-month Eurodollar futures from the Chicago Mercantile Exchange (CME), three-month LIBOR/fed funds basis swap spreads expiring in 12 months, and the Treasury yield curve.

Estimates from the four-nearest quarterly expiring contracts are updated daily using the previous day's closing prices. To illustrate changes in the market's assessment of the average fed funds rate over future three-month intervals, users can view and compare estimates from the prior six weeks for individual contracts. In this tracker we provide the path the market expects the three-month average fed funds rate to take, along with the 25th to 75th percentile region; the probability of a 25 basis point rate hike or cut for the three-month interval starting on the contract's expiration date; and how likely market participants are assessing various future outcomes, distributed across a wide range of possible rates.

An overview of our approach can be found in our Notes from the Vault. For a more detailed look at the model, please refer to this paper and technical note on its implementation.

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