Mar 14, 2023 - Economy

Odds of a half-point interest rate hike vanish

Data: CME Group; Chart: Axios Visuals

Worries about wobbly banks may have put an end to the recent era of beefy Fed rate increases.

State of play: In the market for Fed funds futures, where investors can hedge and speculate on the Fed's key monetary policy rate, prices now suggest there is zero chance the central bank raises its key rate by a half-percentage point when it next announces on March 22.

  • Flashback: Last Wednesday the exact same market was placing roughly 80% odds on such a move after Fed chair Jerome Powell seemed to open the door to such a move in congressional testimony.

What happened: The collapse of Silicon Valley Bank — and then New York's Signature Bank — both seemingly entangled in the fallout from the Fed's rate hikes over the last year.

Worth noting: The market's not pricing in a pause just yet — it's betting the Fed raises rates by a quarter-point next week.

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