Signals that the Fed will skip a rate hike

On Tuesday, the markets gave the Fed only a 33% probability of holding rates steady on June 14. By Wednesday, that probability had spiked to 74%, with the chances of a rate hike plunging to 26%.

Why it matters: The Fed made concerted attempts Wednesday to talk up a so-called skip, bolstered by a WSJ article from "Fed whisperer" Nick Timiraos.

• The markets are now persuaded — at least until Friday morning — that the central bank is willing, in the jargon of finance, to preserve optionality at its next meeting.

How it works: By encouraging markets to think in terms of "skip" rather than "pause," policymakers are signaling that they haven't stopped raising rates, and in fact are inclined to hike in July.

• Notably, the market probability of seeing exactly a quarter point of tightening across the two meetings combined stayed almost constant Wednesday, at about 50%. The balance of probabilities just shifted from hike-then-pause to pause-then-hike.

Be smart: For a central banker, it is better to raise slowly toward the terminal rate than it is to hike past it and then cut. The end result is very similar, but no one likes to look like they moved too far and then had to reverse themselves.

The bottom line: The Fed has signaled that it has plenty of time to raise rates more, if it needs to — the urgency of a rapid succession of half-point hikes is well behind us at this point. From here on out, expect more caution and deliberation than we've seen in this hiking cycle so far.