Fed meeting

Rates markets are fully discounting a 75-bps rate hike by the Federal Reserve this week, with a 13% chance of a 100-bps rate hike.

As markets are ever-forward looking, this week’s rate hike from the Fed may not be a bullish catalyst for the US Dollar if additional rate hikes this year are not signaled. USD/JPY: Retail trader data shows 31.93% of traders are net-long with the ratio of traders short to long at 2.13 to 1. We can measure whether a Fed rate hike is being priced-in using Eurodollar contracts by examining the difference in borrowing costs for commercial banks over a specific time horizon in the future. Fed fund futures, however, remain aggressive in the near-term, with a rapid pace of tightening still expected over the next several meetings. While the Fed will continue to raise rates in 2022, 2023 will likely bring forth rate cuts. Traders see a 113% chance of a 75-bps rate hike in July, 50-bps rate hikes fully discounted in September, and 25-bps rate hikes at the November meeting (the 25-bps rate hike in December is no longer priced-in). The main Fed rate is expected to rise to 3.378% (currently 1.75%) by the end of 2022. Some FOMC members even hinted that a 100-bps rate hike would be possible. In this edition of Central Bank Watch, we’ll review comments and speeches made by various Federal Reserve policymakers since the June FOMC meeting. The near-term rate hike path may be set; Fed policymakers have been quiet about what happens after July. July 8 – Williams notes that a 50-bps or 75-bps rate hike is possible, noting “we are much lower -- even today, with the fed funds trading around 1.6% -- well below where we need to be by the end of the year.” July 12 – Barkin acts non-committal to a 75-bps rate hike, suggesting that he is “one of the guys who like the option value of deciding the week of the meeting as opposed to two weeks before the meeting.” July 7 – Waller (Fed governor) hints at aggressive rate hikes forthcoming, saying “we need to move to a much more restrictive setting in terms of interest rates and policy, and we need to do that as quickly as possible.”

The Federal Reserve is expected to raise interest rates by three-quarters of a point Wednesday afternoon, its second hike in a row of that size.

"The market is pricing a pretty quick end to the hiking cycle. "We have yet to see sequential core CPI falling," said Caron. "To me, if this is a major threshold for them then they're going to continue to be aggressive. "There's the debate of whether they go faster or slower now. That means the Fed would sound "hawkish," or in a mode where it is bent on raising interest rates as much as it needs to in order to curb inflation. "There's still going to be debate within the Fed. You have suddenly a lot of voices. He added, the Fed will not be deterred by falling asset prices as rates rise. The Fed's two-day meeting winds down on the eve of Thursday's release of second-quarter gross domestic product, which is expected by some economists to show a contraction. The futures market is actually pricing in an about face by the Fed next year. If longer duration yields, like the 10-year Treasury note continue to fall on recession fears, the yield curve will invert even further. "I think it's going to be a mixed bag. - "I do think they're going to lean a little bit more hawkish on September," said one strategist. The labor market is still strong though jobless claims have begun to rise.

During the July 2022 meeting, the Federal Reserve is expected to increase the fed fund rate by another 75 bps. There is an outside chance of even a 100 bps rate ...

Fiscal deficit to GDP ratio in countries such as Australia, Canada, UK and US hovered in the range of 14-25% in certain quarters in 2020 and 2021. Developed countries did not fully reverse the rate cuts and liquidity infusion affected in the aftermath of the Global Financial Crisis, 2008. It is likely that at the peak, the Fed fund rate would be around 3.5-3.75%. Much of these would be affected during 2022 itself.

With the Federal Reserve expected to hike its key interest rate by three-quarters of a percentage point on Wednesday to battle high inflation, ...

The U.S. right now is "a world of paradox." A number of Fed officials at various points since the start of the year have said they thought inflation had peaked, only to be caught out as prices continued to rise faster. New employment data scheduled to be released next week will show whether robust job creation, considered an important strength of the U.S. economy right now, continued in July. The U.S. economy "is likely to have contracted in the first half of the year, but job growth remains robust. General Motors Co (GM.N), for its part, said it had eased hiring and delayed planned spending in response to inflation and to hedge against a possible broader slowdown. Fears of a stalling economy were stoked late on Monday when Walmart Inc (WMT.N), whose massive footprint offers a broad view of consumer behavior, cut its profit outlook and said inflation had pressed shoppers to spend their money on food and fuel instead of higher-margin discretionary items like electronics and apparel. Register now for FREE unlimited access to Reuters.com To some economists that has heightened the risk of error, since data on prices may lag the impact of rising rates on the economy and prompt the Fed to continue its monetary policy tightening in the midst of a slowdown. Register now for FREE unlimited access to Reuters.com Register now for FREE unlimited access to Reuters.com Parts of the U.S. bond market are signaling an increased likelihood of recession, with yields on 2-year U.S. Treasury notes now higher than they are for 10-year Treasuries, a possible sign of lost faith in near-term economic growth and reflecting a possibility the Fed may be forced to cut rates within a relatively short span of time. The anticipated increase in the target federal funds rate, the Fed's key tool in trying to lower inflation from a four-decade high, will bring the U.S. central bank to a mile marker of sorts as it reaches a level of around 2.4% that is estimated to no longer encourage economic activity.

Futures pricing implies the greatest odds of a 75-basis point interest-rate increase by the Federal Reserve on Wednesday.

It’s Fed meeting week, and the market doesn’t exactly know what’s going to happen. The latest inflation reading for June showed a 1.3% rise in the consumer price index during the month, stretching its one-year increase to a whopping 9.1%. The Federal Reserve continues to play catch up in its fight against inflation, and there’s no doubt that interest rates are going higher after the Federal Open Market Committee’s two-day meeting concludes on Wednesday. The debate is over the size of the move. A Fed-Rate Surprise Could Be a Problem for the Stock Market