Traders of futures tied to the Federal Reserve's policy rate were pricing in a half-percentage-point hike in interest rates at the U.S. central bank's March 21-22 policy meeting after Fed Chair Jerome Powell said on Tuesday that continued strong inflation data could require tougher measures.
U.S. Federal Reserve Chair Jerome Powell speaks to David Rubenstein during a meeting of The Economic Club of Washington, at the Renaissance Hotel in Washington, D.C., U.S., February 7, 2023. REUTERS/Amanda Andrade-Rhoades/File Photo
March 7 - Traders of futures tied to the Federal Reserve's policy rate were pricing in a half-percentage-point hike in interest rates at the U.S. central bank's March 21-22 policy meeting aftersaid on Tuesday that continued strong inflation data could require tougher measures. Implied yields on fed funds futures contracts fell, pointing to a 48% probability that the central bank will lift its benchmark overnight interest rate to the 5.00%-5.25% range on March 22, from the current 4.50%-4.75% range, according to CME Group's FedWatch tool. That was up from the 30% chance seen before Powell'sFutures briefly showed more than a 50% chance of a 50-basis-point hike immediately after Powell's remarks.
The futures contracts pricing also points to firming expectations for the policy rate to rise to a 5.25%-5.50% range by June. "A 50-bp hike in the next meeting is possible, but it is going to be dependent on the payrolls not slowing down and CPI numbers showing that the disinflation progress we've made is stalling," said Scott Ladner, chief investment officer at Horizon Investments.
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