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U.S. rate futures price in 75% chance of 75 bps Fed hike in June -Breaking

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© Reuters. This illustration shows U.S. banknotes in one-dollar denomination. It was taken on February 8, 2021. REUTERS/Dado Ruvic/Illustration

By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters – The futures for the Federal funds rate were valued in at roughly 75% on Thursday. They are priced in with a 34 percentage point tightening of the Federal Reserve at its next policy meeting. It comes a day following the decision of Fed Chair Jerome Powell to rule out a hike.

Powell stated that a 75-basis point increase was not something the committee is considering. He spoke on Wednesday to answer a question following the Fed’s recent meeting. It also indicated more rate hikes.

Futures rate have included more than 200bps cumulative hikes in 2022, and an annual-end Fed funds rate of 2.85%

Kim Rupert is the managing director of fixed income for Action Economics, San Francisco. “There’s a lot to reflect and repositioning happening after the FOMC Decision…and whether or not the expected rate rises weredovish oder hawkish.”

Powell rejected the idea of a 75-bps increase, but the FOMC continues to march forward and plans to raise the funds rate to 2.625% by year’s end. While inflation is under control, growth has been good this year. This gives the Fed an opportunity to raise rates further.

CME’s FedWatch tool showed that 83% of the CME members had a high probability for a rate hike at 75 bps.

DataTrek Research (NYSE:) stated that “Apparently Fed Funds Futures did not listen to Chair Powell yesterday.”

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