By Ann Saphir
(Reuters) -The Federal Reserve is likely to raise its policy rate once more in May to a range of 5.00%-5.25%, according to interest rate futures, even after a government report on Wednesday showed March consumer prices notched their smallest gain in almost two years.
U.S. short-term interest rate futures rose after the report, and now reflect about a 68% chance of a quarter-of-a-percentage-point rate hike in May, down from about a 73% chance seen before the data. The current target range is 4.75%-5.00%.
Easing gasoline prices slowed overall inflation to an annual 5% pace, down from 6% in February.
But underlying price pressures remain strong, bolstered by housing and other services-related inflation, suggesting the Fed needs to tighten policy further to make more headway on bringing inflation down to its 2% goal.
Fed policymakers are contending with a competing concern: potentially tighter credit conditions…
Read More