For the First Time in Nine Months, the Market Expects Two Fed Hikes in 2018
How the Fed Could Surprise Markets
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On the eve of Janet Yellen’s second-last Federal Open Market Committee meeting as chair of the U.S. central bank, before handing over the reins to Jerome Powell, investors are showing the most confidence in nine months toward the prospect of higher interest rates next year.
The spread between January 2018 and January 2019 fed funds futures contract yields, a proxy for how many times rates will be raised next year, widened to half a percentage point on Tuesday for the first time since March, pricing two quarter-point increases. Back in September, investors weren’t even fully pricing a single hike.