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Fed Swaps Price In One-in-Three Chance of Full Point July Rate Hike

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Swap markets show traders are now pricing in a significant possibility that the Federal Reserve will implement a 100-basis-point hike in July in the wake of hotter-than-anticipated inflation data.

The rate on the July contract rose as high as 2.416% after the consumer-price inflation data, some 83.6 basis points above the current effective fed funds rate. That implies a hike of at least 75 basis points is seen as definite and around a one-in-three chance that it could be a full percentage point. The market had already shifted earlier in the day to fully price in a 75-basis-point increase.