Bond traders are growing more confident they will see the Federal Reserve raise interest rates in September, according to an article by Brian Chappatta for Bloomberg.
A June rate hike is all but decided on as bond traders place the odds of an interest rate hike at 80%. The odds of September are lower but growing, and doubled their chances since last week to 40% on Tuesday, according to the article.
But bond traders aren’t the only ones expecting to see the Fed raise rates in June. Other experts are also predicting the second rate hike this year will be next month.
From the article:
Financial markets aren’t waiting to find out if this is the year Fed policy makers stick to their forecast, which is for two more hikes in 2017. Two-year yields touched 1.35 percent Tuesday, the highest since March, while the Bloomberg Dollar Spot Index reached the strongest in almost a month. Both were little changed Wednesday.
“The Fed is very consistent this year: They’re saying, from their standpoint, the unemployment rate and the path it’s going is below where they think is full employment,” said John Herrmann, director of rates strategy at MUFG Securities Americas Inc. “It’s consistent with removing accommodation further at the June meeting, and perhaps at the September meeting like we expect.”
Even after the recent slow-down in economic growth, Fed officials indicated it would not change the decision for June’s rate hike.