The market for wagers on the Federal Reserve’s policy rate priced in near-even odds of a quarter-point rate increase in June, assuming moves of that size in March and May.
(Bloomberg) — The market for wagers on the Federal Reserve’s policy rate priced in near-even odds of a quarter-point rate increase in June, assuming moves of that size in March and May.
The rate on the June overnight index swap contract rose to 5.21%, about 63 basis points above the current effective fed funds rate.
The market also priced in a higher eventual peak for the policy rate, with the July contract rising to 5.27%, and repriced the odds of a quarter-point rate cut from the peak by year-end to less than 100%.
The Fed has raised its policy rate eight times since March 2022, most recently to a range of 4.5%-4.75% on Feb. 1, after dropping the lower bound to 0% two years earlier at the onset of the pandemic.
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