Mar 16, 2023 - Economy

Investors boost bets on Fed pausing hikes

Data: CME Group; Chart: Axios Visuals
Data: CME Group; Chart: Axios Visuals

Does the still simmering banking crisis mean the Fed will hit pause on rate hikes? More of the market now seems to think so.

Driving the news: Numbers derived from the Fed Funds futures markets suggest more than 50% odds that the Fed won't fiddle with its key monetary policy rate at all, when its next statement comes out on March 22.

Context: Just a few days ago — before the collapse of Silicon Valley Bank and Signature Bank — the markets were pricing in a half-point hike next week to counter stubbornly high inflation.

  • Yes, but: That doesn't mean investors overwhelmingly agree the romp of rate hikes is completely done. They're still putting roughly 50% odds on a quarter-point hike at the Fed's following meeting, in May.

The bottom line: The Fed is arguably the most important player in financial markets. The flurry of rate increases it delivered last year pummeled stocks, sending the S&P 500 down 19.4%, the worst annual drop since 2008.

  • So, if the Fed shifts from hiking to holding steady, that's a big deal.

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