(Reuters) -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.
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’s testimony before the Senate Banking Committee.
Futures briefly showed more than a 50% chance of a 50-basis-point (bp) 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…
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