Markets price in 25-basis-point Federal Reserve rate rise
CME FedWatch pricing put the odds of a quarter-point increase at about 92.7% as the Federal Reserve’s September meeting began.
Markets were positioning for a 25-basis-point increase in the Federal Reserve’s federal funds rate as the central bank began its September policy meeting on 15 September.
CME Group’s FedWatch tool, cited by Yahoo Finance, put the probability of a rate rise at about 92.7% on Tuesday. The increase remained a market expectation rather than a confirmed decision, with some estimates placing the odds closer to 85%.
A rise would reportedly be the first increase in the federal funds rate since 2023. Expectations strengthened after August consumer prices rose 0.3% month on month, above the 0.2% increase economists had expected.
Inflation has remained above the Fed’s 2% target for more than five years, according to the source material. Oil prices above US$100 a barrel were also cited as a concern for the inflation outlook.
Bond markets reflected the tension around the decision. The 10-year Treasury yield reached 5.04%, its highest level since 2007, while the 30-year yield touched 5.39%.
The Federal Open Market Committee meeting began at 10.30am ET as scheduled. The Fed’s policy statement, interest-rate decision and economic projections were due at 2pm ET on 16 September, with investors focused on the so-called dot plot for signals about the path of monetary policy.
