Although the Fed has raised interest rates sharply so far, it is expected to raise its policy rate above 5% by next May following a report on Friday (2nd) showed little sign of cooling in the job market.
Futures contracts tied to the Fed’s policy rate hinted at a 70 percent chance of a slower pace of rate hikes when it meets on Dec. 13-14, following the Labor Department reported that U.S. jobs rose more than expected in November. The past 4 meetings have raised interest rates by 75 basis points.
But traders are also betting the Fed will keep raising rates next year to slow the economy and demand for goods, services and labor.
Fed Chairman Jerome Powell said this week that the job market is “too good” to ease price pressures.
According to futures contract prices and the CME Fedwatch tool, the Fed will raise the current policy rate range of 3.75-4% to 4.92% in March next year, and is likely to rise to the 5-5.25% range in May next year.
Ahead of the jobs report, policy rates are expected to peak in a range of 4.75% to 5%.
