Traders Cast Doubt on More Fed Hikes as Even December Odds Ease
- Eurodollar futures curve prices in less than one rate hike
- Global equity selloff and trade tensions erode confidence
Traders of U.S. interest-rate futures are rapidly losing confidence that the Federal Reserve will continue to raise rates, with a near-certain hike in December now coming into doubt and almost no tightening expected for next year.
The central bank has raised the federal funds target range eight times since December 2015, and is still expected to increase it again on Dec. 19. But the market-implied expectation for next year edged below a quarter point last week after Fed Chair Jerome Powell said the policy rate is approaching neutral, and has crumbled this week amid a slide in global equities. A massive repricing in short-term interest rates has also shifted chances of a December rate hike lower, with just 18 basis points of a hike now priced in. Policy makers’ latest set of forecasts, from September, anticipates three more increases in 2019.