Markets Shift on Next Federal Reserve Meeting: Reasons for Changing Interest Rate Pricing

Investing.com – Expectations for the next Federal Reserve meeting changed significantly immediately after the release of US employment data.

Interest pricing has been subjected to noticeable fluctuations during the past few days, as the markets were likely last week to raise the interest rate at the next Federal Reserve meeting due to its hard-line statements. However, this pricing witnessed a shift during this week after other members indicated the possibility of fixing interest at the next meeting. However, it has now changed for the third time, after the employment data was released a short while ago.

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Fed statements this week

“The decision to keep the interest rate steady at an upcoming meeting should not be interpreted as meaning we have reached the peak rate of this cycle,” Federal Reserve Governor Philip Jefferson said in a speech Wednesday in Washington.

He added, “The fixing of interest rates at the next meeting will allow the committee to see more data before making decisions about whether or not to raise rates again.”

Jefferson’s comments were important because President Biden nominated him in May to serve as vice chair of the Fed, a position that usually helps the Fed chair shape the monetary policy agenda ahead of the FOMC meeting to set interest rates.

Philadelphia Fed President Patrick Harker, a voting member of the Federal Open Market Committee this year, also endorsed on Wednesday keeping interest rates steady in June.

“I am watching the data coming in closely, and I am looking at economic conditions to assess whether additional tightening is needed,” Harker said.

He continued, “I think we are close to the point where we can stabilize interest rates, and allow monetary policy to do its job to bring inflation back to its target in due course.”

Interest pricing now

Expectations change to 37.9% in favor of raising interest rates by 25 points, after it was 22.8% the previous day. The tool also indicates that it has stabilized at 62.1%, up from 77.2% the previous day.