Traders Ratchet Up Fed-Hike Bets for 2022 on Hot Inflation
- Odds of 2022 hike rise following April’s above-estimate CPI
- Eurodollar futures trade heavy as hike premium gets factored
This article is for subscribers only.
Rates traders are boosting bets that the Federal Reserve may be forced to hike interest rates next year, much earlier than policy makers have indicated, after blowout U.S. consumer-price data Wednesday intensified the debate about how hot inflation could run.
Eurodollar futures contracts are pricing in more than 80% odds of a quarter-point rate increase by the end of 2022, up from a two-in-three chance at the start of the week. That’s roughly a full year earlier than policy makers have signaled and comes amid growing calls from the likes of former New York Fed President William Dudley, who says the central bank not only needs to raise rates, but should likely do so by much more than investors expect.