The CME Group FedWatch tool lets you quickly gauge the market’s expectations of potential changes to the Fed Funds target rate. The CME Group FedWatch is based on 30-Day Fed Funds futures prices, which have long been used to express the market’s views on the likelihood of changes in U.S. monetary policy.
FOMC meetings are matched with the corresponding 30-Day Fed Funds Futures contract.
Probabilities of possible Fed Funds Target Rates are calculated based on the post-meeting Fed Fund Futures contract price.
Probability of Rate Hike is calculated by adding the probabilities of all target rate levels of 0.50 or higher.
The FedWatch tool is based on the assumption that the Federal Reserve Bank will target a single number and not a range for the federal funds target rate. Therefore, while the fed is targeting a range, one should use implied probabilities as a reasonable guide.