Traders’ Expectations For Fed Rate Hike Are Undecided

US federal funds futures showed about a one-in-three chance of another interest rate hike in November, up from one-fifth yesterday. While the odds of another rate hike increased, the rising range is modes. Traders remain skeptical about whether another rate hike is necessary under the recent financial environment and no wonder the stock market is still climbing. Daly, this year’s FOMC alternate member and San Francisco Fed President said yesterday that the slowdown in wage growth is a glimmer of hope shown in the latest report, which is good news for the Fed, while the recent surge in yields reduces the need to raise interest rates again. Former Fed Vice Chairman Clarida agreed with that point. Daly also said the recent tightening in bond markets is equivalent to about one interest rate hike. Since their comments, yields have climbed further. The historic sell-off in the US Treasury market pushed financial conditions to their most tense state since the peak of the Fed’s hawkish policy in late 2022.