With one more aggressive rate hike by the Federal Reserve seen as a done deal, traders and investors are focusing on clues about the size of December's move.
With one more aggressive rate increase by the Federal Reserve seen as a done deal on Wednesday, traders are just about evenly split on the most likely size of the next hike in December.Financial markets are heading into Wednesday afternoon’s rate decision with fed-funds futures traders seeing a tossup between the likelihood that December’s rate hike will be either 50 or 75 basis points. The chances were split between 47.9% and 46.6%, respectively, and a slim 5.
December matters because traders and investors are hungry for any signs that policy makers will begin to back off their most aggressive campaign of rate hikes in a generation. The Fed is expected to lift the fed-funds rate target by three-quarters of a percentage point on Wednesday to between 3.75% and 4%, up from almost zero in March. It would be the fourth consecutive hike of that size.
Policy makers are set to release a statement at 2 p.m. New York time, followed by Powell’s news conference at 2:30 p.m., in which traders see a risk that he could move financial markets by providing further insights into officials’ current thinking.
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