Fed Rate Hike Doubts Creep Into Market for First Time This Cycle
- Swaps show 80% chance of quarter-point rise in benchmark rate
- Fed tightening largely finished as investors see credit crunch
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Bond traders are lacking true conviction about the Federal Reserve’s policy intentions for the first time since the central bank’s frenetic tightening cycle began a year ago.
Ahead of Wednesday’s Fed decision, swaps are priced for just an 80% chance of a quarter-point rate hike. That marks a departure from every other Fed meeting over the past year, in which traders have fully priced at least one such move. Instead, the debate until now has been over whether rate hikes would be in 25-, 50- or 75-basis-point increments.