Derivatives Traders Drop Outlook for Rates After Fed Sees Risks
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The gap between Federal Reserve projections for how high borrowing rates will rise and where traders of the world’s most active short-term interest-rate futures see policy makers stopping is getting bigger.
The market was pricing the peak fed funds rate, known as the neutral or terminal rate, at about 1.8 percent in December 2018 after the Federal Open Market Committee issued a policy statement following a meeting, citing global risks to the economy and saying it expected inflation to fall further. The outlook was down about 0.15 percentage point from earlier Wednesday. The median of Fed officials’ most recent quarterly forecasts was for a long-run rate of 3.75 percent.