US Treasury bond yields climbed to the highest level in at least 10 years, rising in line with concerns that the Fed will rapidly increase interest rates and the economy will contract. Although Fed officials pointed out that the possibility of a 75 basis point rate hike is low in their statements in the past weeks, it is thought that the Fed may now take this step after the data showing that the rate of price increase has not slowed down yet.
The Fed interest rate meeting will take place from 14 to 15 June. The Fed rate decision is expected to be announced on June 15 at 21:00.
The high inflation data announced in the USA and the rapid change in the views of the investors may cause the Fed to raise interest rates by 75 basis points at its meeting that will end tomorrow. Although Fed officials pointed out that the possibility of a 75 basis point rate hike is low in their statements in the past weeks, it is thought that the Fed may now take this step after the data showing that the rate of price increase has not slowed down yet.
In the news in the Wall Street Journal yesterday, it was stated that the possibility of a surprise move from the Fed increased, and the transactions in futures contracts sensitive to monetary policy increased. Fed officials, who stopped speaking publicly two weeks before the monetary policy meeting, as usual, stated that they were inclined to increase interest rates by 50 basis points tomorrow, in the statements they made until this date. However, forecasts for 50 basis points depended on “economic and financial conditions being largely in line with expectations…” as Fed Chairman Jerome Powell stated after his monetary policy meeting in May. At the same meeting, Powell said, “Expectations are for the inflation (curve) to stop rising.” However, inflation did not stop its rise. On the contrary, data released on Friday showed that the increase in consumer prices increased to 8.6% year-on-year in May.
The indicator, which is based on the "sorted average", which is closely watched by the Fed and compiled by the Cleveland Fed, shows that price pressures are widespread, and that it is not limited to the services sector that has seen high price increases.
showed. Pricing in the markets changed sharply yesterday, with contracts based on the Fed policy rate showing that traders have almost 75% probability priced a 75 basis point hike. If the Fed raises rates by 1994 basis points, it will be the largest rate hike since November XNUMX.