Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

U.S. fed funds, eurodollar futures raise rate hike bets after CPI data

EconomyJul 13, 2021 11:25AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: The Federal Reserve building is pictured in Washington, DC, U.S., August 22, 2018. REUTERS/Chris Wattie

By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) -Futures on the federal funds rate and eurodollars, which track short-term interest rate expectations over a period of several years, raised bets on Tuesday that the Federal Reserve would tighten monetary policy between December 2022 and early in the first quarter of 2023 after stronger-than-expected U.S. inflation data.

The fed funds market showed a roughly 90% chance of a rate hike by December 2022, fully pricing in that scenario by January 2023.

The more liquid eurodollar futures market also indicated a 90% probability of a Fed rate increase of 25 basis points in December 2022, while fully pricing in Fed tightening by March 2023. In May, a rate hike by December 2022 was pegged at 80%, with a 100% chance of tightening around April 2023.

Data showed the U.S. consumer price index increased 0.9% last month, the largest gain since June 2008, after advancing 0.6% in May. The so-called core CPI surged 4.5% on a year-on-year basis, the largest increase since November 1991, after rising 3.8% in May.

"It is going to be difficult for the Fed or any of the talking heads to try to talk it (inflation) away as transitory," said Ken Polcari, managing partner at Kace Capital Advisors in Boca Raton, Florida.

"It raises the conversation, it is significantly stronger and that plays right into the ongoing inflationary concerns."

After the U.S. central bank's June 15-16 monetary policy meeting, which culminated with the release of Fed projections showing a majority of policymakers expected at least two rate increases in 2023, fed funds futures had factored in a 90% chance of a rate hike by January 2023.

Prior to that Fed meeting, the market fully priced in a rate increase by April 2023.

In its policy statement last month, the Fed, however, pledged to keep policy supportive for now to encourage an ongoing jobs recovery.

But the inflation surge could keep the pressure on the central bank to tighten policy, analysts said.

James Knightley, chief international economist at ING, said in a research note that the case for a rate hike next year is strong.

He expects U.S. headline inflation to stay above 4% until the first quarter of 2022, with core inflation unlikely to get below 3% until the summer of next year.

U.S. fed funds, eurodollar futures raise rate hike bets after CPI data
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email