U.S. rate futures price in 70% chance of 50 bps hike in June Fed meeting

(Reuters) – Futures on the federal funds rate have priced in a roughly 70% chance of another half a percentage-point tightening at next month’s meeting after the Federal Reserve lifted the rate by the same magnitude on Wednesday.

The Fed on Wednesday raised its benchmark overnight interest rate by half a percentage point, the biggest jump in 22 years, and said it would begin trimming its bond holdings next month as a further step in the battle to lower inflation.

Rates futures have also factored in more than 200 basis points of tightening in 2022, with an implied fed funds rate of 2.9%.

Wednesday’s fed funds rate is currently at 0.33%.

The post-Fed rate decision will be reflected in Thursday’s fed funds.

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Chris Reese)