Capital markets forecast Federal Reserve to raise interest rates by 75 bps in June

Federal Reserve ​building

Capital markets expect the Federal Reserve to raise the interest rates by 75 basis points (pbs) in June after the US central bank decided on April 4 to raise the interest rates by 50 bps – the most since May 2000.

Futures on the federal funds rate priced in a nearly 75% chance of a three quarters of a percentage point tightening by the Federal Reserve in June meeting.

This was despite Fed Chair Jerome Powell ruled out such a rate hike.

Rate futures also factored in more than 200 bps of cumulative hikes for 2022 and a year-end fed funds rate at 2.85%.

The CME's FedWatch tool also showed a large rate increase probability of 83%, or 75 bps.