While the earnings season is on full throttle, a new theme appears in the market. Investors and economists are betting that another rate hike is just around the corner. These speculations have been influenced by the recent banking sector stress and the Fed’s March 21-22 policy meeting’s highlight on a potential economic downturn and inflation still being stubbornly high.
According to CME’s “Few Watch Tool,” investors expect a 25 basis point increase on the May 3, 2023 meeting. The tool analyzes the likelihood that the Fed will change the Federal target rate at upcoming FOMC meetings based on the pricing of the 30-Day Fed Funds Futures pricing data. The tool shows how investor sentiment has shifted from a low probability hike to an 83.7% probability in a month.
