US interest rate futures raise the likelihood of sharp rate hike in May after Powell comments

© . FILE PHOTO: US Federal Reserve Chair Jerome Powell addresses an online press conference in a frame grab video broadcast from the Fed building in Washington, US, Jan. 26, 2022. US Federal Reserve Board/Handout via REUTERS /File Photo NEW YORK ( ) – Federal fund interest rate futures on Monday raised the likelihood of a half-percentage-point tightening by the Federal Reserve at its next policy meeting in May, following aggressive comments from Fed Chair Jerome Powell. Powell said Monday that the Fed needs to act “quickly” to reduce excessive inflation, and will use more-than-usual rate hikes to do so if necessary. In late afternoon trading, interest rate futures showed a 63% chance the Fed will hike rates by 50 basis points to 0.75%-1.00% in May, less than a week after the Fed hiked a quarter point to 0.25 %-0.50%. “Fed Chair Powell was more aggressive than we were, and the market expected, emphasizing the need to tackle inflation rather than take a cautious approach due to the various uncertainties surrounding growth,” Action Economics said in its latest blog. “Is he readying the markets for a 50 basis point increase in May? It’s also true that the balance sheet reduction is expected to be announced in May, with some insights before it appearing in the minutes expected on April 6.” Throughout the year, futures have priced in 184 basis points of policy tightening. Futures had priced in about a 52% chance of a 50 basis point gain at the May meeting, just before the text of Powell’s comments was released at a National Association of Business Economics conference. Other metrics, such as the CME FedWatch tool, showed a 48.4% chance of a 50 basis point gain in May. (This story adds Powell’s name in the second paragraph) Disclaimer: Fusion Media would like to remind you that the data on this website is not necessarily real-time or accurate. All CFDs (Stocks, Indices, Futures) and Forex prices are not provided by exchanges but rather by market makers, and therefore prices may not be accurate and may differ from the actual market price meaning prices are indicative and not suitable for trading purposes . Therefore, Fusion Media does not bear any responsibility for any trading losses that you may incur as a result of using this data. Fusion Media or anyone associated with Fusion Media accepts no liability for any loss or damage resulting from reliance on any information, including data, quotes, charts and buy/sell signals on this website. Be fully informed about the risks and costs associated with trading the financial markets, it is one of the riskiest forms of investment possible.

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