Two accused teenagers to remain in custody for at least two more weeks | SaltWire #newsupdate #newsNEW YORK - Options on Secured Overnight Financing Rate futures are showing a higher probability that the Federal Reserve could hike interest rates a quarter percentage point this year and next as U.S. inflation and the labor market remain resilient.
Analysts said it would take a full-blown re-acceleration in inflation for the Fed to tighten again. That is not the baseline scenario for most economists. "If you look purely at the data and you did not have the rhetoric coming from central banks, we would be pricing in hikes, not cuts," said Akshay Singal, head of short-term interest rate trading at Citi.
The prospect of a no-cut scenario for 2024 is 31%, up from 20% a month ago, BNP Paribas data showed. Chances of the first 25-bp hike in 2025 are at 22%. Volume though is typically thin the further out the curve so that number can change. "There's a very high threshold to price a shift in Fed policy," said Bruno Braizinha, rates strategist at BofA Securities."U.S. data needs to improve by a lot for the market to abandon rate cuts and transition to pricing hikes."
Implied vol is a gauge of how much the option market believes rate swaps will move in either direction over a given time frame. The higher the vol, the greater the perceived instability over a given period.
Source: News Formal (newsformal.com)
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