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Following Chair Jerome Powell's speech, interest rate futures linked to the Federal Reserve's policy rate boosted the likelihood of tightening by the US central banks at both the November and December policy meetings.
The Fed is largely anticipated to maintain rates unchanged at its meeting on September 19-20.
Powell said on Friday that the Fed would "proceed carefully as we decide whether to tighten further," but he also stated that the central bank has not yet determined that its benchmark interest rate is high enough to ensure that inflation returns to the 2% objective.
He made the comments during the Kansas City Fed's annual economic conference in Jackson Hole, Wyoming.
Refinitiv's FedWatch projected an approximately 46% likelihood of a 25 basis point hike in interest rates at the November and December meetings, to a range of 5.50% to 5.75%, compared to 42.7% and 40.9% before Powell spoke. FEDWATCH
The CME's FedWatch tool indicated nearly the same rate rise odds: 41.2% at the Oct. 31-Nov. 1 meeting and around 39% at the year's last meeting on Dec. 12-13. A week ago, the probability of a rate hike were 33% and 29%, respectively.
Interest rate futures linked to the Fed policy rate have moved significantly in recent weeks.
A recent backup in Treasury yields may help buttress the Fed's efforts to weaken demand and slow the momentum of an economy that has so far mostly shaken off the most aggressive monetary tightening in more than a generation.
The Federal Reserve raised its policy rate from near zero in March 2022 to the present range of 5.25% to 5.50%, yet unemployment remains at a record low 3.5%, and overall economic growth has defied forecasts.
Rate futures have significantly repriced in tandem with the increase in bond rates. While the Fed is expected to stay unchanged next month, the move in rate futures now puts a raise at either of the year's last two meetings fully in play.
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