Fed futures push next hike toward Sept as Yellen speaks

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Fed funds futures slipped toward a September interest rate hike as Federal Reserve Chair Janet Yellen spoke on the state of the U.S. economy, according to traders at the CME.

The Fed said Wednesday at its March meeting that it expected two rate hikes in 2016, down from the four predicted at the December meeting. After the news, federal funds futures showed chances of interest rate increases falling for each month tracked by the CME.

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Thirty-day fed funds futures prices are widely considered a bellwether of U.S. monetary policy changes. CME's FedWatch tool tracks the target rates based on fed funds futures contract prices.

Yellen was wary of forecasting a lasting uptick in inflation during her post-meeting remarks. Odds of an rate hike slipped further back during the chair's news conference, first hitting July, then settling on September at 52 percent by 3:30 p.m. ET.

A reading above 50 percent indicates the market's guess for the next rate hike.

During the speech, odds dropped in all months tracked by CME:

  • April: 12 percent, down from 14 percent prior to the 2 p.m. ET announcement.
  • June: 38 percent chance, down from 49 percent
  • July: 45 percent chance, down from 59 percent
  • September: 52 percent, down from 89 percent
  • November: 57 percent, down from 99 percent
  • December: 67 percent, down from 89 percent
  • February 2017: 69 percent, down from 92 percent