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Markets fully price in quarter-point interest rate hike in February as inflation slows



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The Marriner S. Eccles Federal Reserve Board Building in Washington, D.C.Sarah Silbiger | ReutersMarkets are nearly certain the Federal Reserve next month will take another step down in the pace of its interest rate increases.Pricing Wednesday morning pointed to a 94.3% probability of a 0.25 percentage point hike at the central bank’s two-day meeting that concludes Feb. 1, according to CME Group data. If that holds, it would take the Fed’s benchmark borrowing rate to a targeted range of 4.5%-4.75%.related investing news While the probability is little changed since late last week, economic data Wednesday helped solidify the idea that after a succession of aggressive hikes — four consecutive three-quarter point hikes in 2022, at one point — the Fed is ready to take its foot off the brake a bit more.The producer price index fell 0.5% in December while retail sales were off by 1.1%. Both indicate that Fed hikes are pulling down inflation and slowing consumer demand.”We are changing our call for the February FOMC meeting from a 50 [basis point] hike to a 25bp hike, although we think markets should continue to place some probability on a larger-sized hike,” Citigroup economist Andrew Hollenhorst wrote in a client note.”Softer PPI will join with slower consumer price and wage inflation to most likely push the Fed toward a 25bp increment,” he added. A basis point is 0.01 percentage point.St. Louis Fed President James Bullard said Wednesday morning that he would prefer that policymakers stay on a more aggressive path.The rate-setting Federal Open Market Committ …

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