After a series of supersize rate hikes in 2022, traders are overwhelmingly betting on a standard quarter-point rise from the Federal Reserve at its first meeting of 2023 following a further slowdown in inflation and remarks by policy makers. Fed-funds futures on Thursday reflected a 94.2% probability the Federal Open Market Committee will raise the benchmark rate by 25 basis points, or a quarter percentage point, to a range of 4.5%-4.75% from its current range of 4.25%-4.5% when it concludes a two-day meeting on Feb. 1, according to the CME FedWatch Tool. There’s just a 5.8% chance the fed-funds rate will rise 50 basis points to 4.75%-5%.
“U.S. inflation shows price pressures are easing, yet in an environment of a strong jobs market, the Federal Reserve will be wary of calling the top in interest rates. A 25bp (basis point) hike in February is likely with a further 25bp in March. Inflation will slow even more meaningfully in 2Q though, with the prospects for 2H rate cuts looking strong as recession bites hard,” said James Knightley, chief international …