Fed, Traders See 25-Basis-Point Rate Hike by October as May Inflation Hits 4.2%
Updated
Updated · CNBC · Jun 10
Fed, Traders See 25-Basis-Point Rate Hike by October as May Inflation Hits 4.2%
3 articles · Updated · CNBC · Jun 10
Summary
Traders now assign a 66% chance of at least one quarter-point Fed rate hike by year-end, with a majority expecting rates to be at least 25 basis points higher by October.
May consumer prices rose 4.2% from a year earlier, up from 3.8% in April and still far above the Fed’s 2% target, prompting more hawkish signals from officials including Dallas Fed President Lorie Logan.
Markets still expect the Fed to hold rates steady at its June 17 meeting, but they are also pricing a 23.5% chance that rates will be at least half a percentage point higher by December.
For households, another hike would add only a few dollars a month on typical credit-card, auto-loan and personal-loan balances, while HELOC borrowers would feel the impact more directly and some savers could get higher deposit yields.
The shift marks a sharp reversal from April, when investors largely expected the next move to be a rate cut, and comes despite President Donald Trump’s repeated calls for lower rates.