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U.S. fed funds futures fully price in rate hike by December 2022 after payrolls By Reuters

by Mike Robinson

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© Reuters. FILEPHOTO: Washington’s Federal Reserve is set against blue skies on May 1, 2020. REUTERS/Kevin Lamarque/File Photograph

NEW YORK, (Reuters) – Futures on federal funds rates, which are short-term interest rate forecasts, have priced in a quarter point tightening by Federal Reserve by November or December next years despite a U.S. employment report coming in below expectations.

A 94% probability of a rate increase by November 2022 was shown in the fed funds market, which fully priced that scenario for December 2020. This was the exact same as before the publication of the payrolls reports.

The data showed that nonfarm U.S. payrolls increased only 194,000 jobs in the last month. This is below expectations of an increase of 500,000 jobs.

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