Market-implied odds that the Federal Reserve could deliver another 25 basis point interest-rate hike at its May meeting improved Wednesday following the Fed’s latest decision on interest rates. Fed funds futures, which traders use to place bets on changes in interest rates, are now pricing in 40% probability of the Fed funds rate topping 5% in May. That’s slightly higher than before the release of the Fed’s latest statement, which accompanied its decision to hike rates by 25 basis points to 4.75% on Wednesday afternoon following the conclusion of its February meeting. Traders still see higher odds that the Fed will deliver one final 25 basis point rate hike at its next meeting in March, bringing rates to a peak of 5%, before putting things on hold for most of the year before delivering a cut in the fourth quarter, according to the CME’s FedWatch tool. Stocks traded mixed following the latest rate decision, with the Nasdaq Composite COMP holding on to gains while the S&P 500 SPX fell 0.3%,
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