Odds of a rate increase by the U.S. Federal Reserve this year have diminished, just a month after it boosted rates for the first time in 11 years. The next Fed announcement is due on Wednesday.
U.S. overnight index swaps, a gauge of investor expectations, no longer fully price in a 25 basis point increase in the Fed funds target rate this year. They now show a reduced probability of further tightening due to global market turbulence induced by yuan devaluation and the extended oil-price slump. The median of Fed’s dot plot published at the last policy announcement on Dec. 16 showed as many as four rate increases.