The Federal Reserve announced that it will begin to wind down its bond program. Futures markets moved slightly, indicating that traders believe the Fed will raise interest rates by July next year.

Traders betting the Federal Reserve hikes ratesAccording to Fed funds futures contract, it will be two more times by 2022 and three times again in 2023.

According to Mike Schumacher (director rates at Wells Fargo), the Fed announcement of 2 p.m. indicated that futures traders see the first complete rate rise by July.

As expected, the Fed said that they would start tapering its $120 billion monthly bond purchases. This will begin this month. Many speculated that the Fed might raise interest rates as soon as the bond purchases have been completed.

The futures showed a chance of a hike in the next summer at 75%. However, a complete hike was expected by September following the Fed’s statement. Schumacher stated that expectations for the end of 2018 were stable with just a little more than two increases, which is 0.58 percentage point priced in.

Three more increases are expected for 2023 by traders.

The Fed has lowered its target Fed Funds Target Range to zero-25 basis points since the start of the pandemic.