Key insights
- Traders have slightly reduced expectations for a September Fed rate hike following the latest CPI report, which met expectations. However, conviction remains strong for a rate hike by October, indicating ongoing concerns about inflation and a potentially tighter monetary policy stance. This suggests continued upward pressure on borrowing costs and potential headwinds for risk assets.
June 10 (Reuters) - Traders of short-term U.S. interest rates edged away from bets that the Federal Reserve rate will deliver a rate hike as soon as September, but continued to show strong conviction of a rate hike by October, after a government report showed consumer inflation rose 4.2% last month as economists had expected.
Pricing now reflects about a 45% chance of a September rate hike, versus just under 50% before the report. Traders see about a 60% chance of a hike by the October meeting.
(Reporting by Ann Saphir)