The Fed is financing the price of futures on the rise until May 2022 after a statement from Fed Reuters


Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) – Futures on the federal funds rate on Wednesday tightened the price by a quarter of a point by the Federal Reserve until May next year after the US Federal Reserve doubled the rate of monthly rate cuts and recorded three rate increases in 2022.

The federal fund market has fully reached the price of tightening the Fed by May. Traders took into account the 50% chance of a move in March 2022.

For 2022, federal fund futures are betting on three increases according to a Fed statement.

The Fed, signaling that its inflation target has been met, said on Wednesday that it would suspend pandemic bond purchases in March and pave the way for a three-quarter-percent increase in interest rates by the end of 2022 and three more in 2023. inflation.

Meanwhile, the more liquid Eurodollar futures market indicated that the Fed’s first increase could be in May or June, with three increases as well.

“It’s mostly in line with market expectations. Markets may be a bit of a hawk out of it,” said Gregory Daco, chief U.S. economist, at Oxford Economics in New York City.

“But I think it’s a pretty balanced point of view in terms of looks so from a market perspective I don’t think it should cause a big tightening of financial conditions.”

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