Fed funds market puts a 25% probabiltity on a 75 bps FOMC hike

The odds of an FOMC surprise on Wednesday are rising in the aftermath of the FOMC decision.

The implied probability is now 25%, with the remainder signaling a 50 bps hike.

For me, if there's a surprise it's more-likely to be 100 bps but it would have to be combined with the Fed signaling that it will hit the terminal top sooner. In any case, Powell faces a difficult press conference. There's no way he came come out with some kind of 'dovish hike' because they're so far behind the curve.

Citi notes that the OIS market is pricing in 252bps of hikes by the end of the year and that the dots could be a way to be incrementally more hawkish.

"CitiFX Strategy gives their playbook in June FOMC Playbook: hawkish Fed, bullish USD but caution on the day We expect the Fed to amplify its hawkish stance at the 15 June FOMC meeting by sharply raising median dots by more than the rise in inflation Inflation Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Read this Term.

"Even though we don’t expect the Fed to endorse or signal a 75bp hike, we expect new language to reinforce that the pace of tightening will be increased if needed," Citi adds.

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