Yesterday, Fed Chair Jerome Powell essentially ruled out hiking 75 basis points at the June 15 FOMC meeting.
"A 75-basis-point increase is not something the committee is actively considering," he said, later adding: "Our expectation is if we see what we expect to see, then we would have 50 basis point increases on the table at the next two meetings."
Yet here's what Fed funds futures are pricing in for the meeting according to the CME Fedwatch took.
That's an 82.9% chance of a 75 basis point hike.
I wonder if there are some technical factors in play here but this looks like a slap to the face of the Fed chair. It's the market saying that inflationary pressures in the next five weeks will force Powell to put his tail between his legs and increase the pace of tightening.
That aggressive questioning of Fed credibility so soon after a meeting is almost unheard of. It's a suggestion that Powell and the Fed don't have a handle on what's happening in the economy.
In the next few days, I would expect Powell to line up several FOMC members to underscore his message but right now that's looking like a tough fight.
