Traders pull back on another Fed hike, still likely this year

Traders still see another Federal Reserve rate hike this year as likely, but that expectation has weakened. Bets fell from a level where an increase was strongly favored Thursday to one where it remains likely Friday. The reason for the retreat is not yet clear; traders can shift expectations before an explanation becomes public.

The change played out over two days. Expectations eased through Thursday, then steadied overnight. Friday morning brought a brief recovery, but bets fell more sharply around midday, leaving traders less convinced of a hike than they were at the start of Thursday. Even after that decline, an increase still appears more likely than not.

For this question, a hike means the Fed raising the upper bound of its target federal funds rate after the September 15-16 meeting and through the completion of its December meeting. An increase announced as a result of the December meeting counts; the September decision itself does not. The focus is on a fresh increase later in the year, rather than on whether the Fed changed rates in September.

The December Fed meeting is the next scheduled decision relevant to the question. A rate increase during that meeting, or announced as a result of it, would meet the outcome. A decision to hold rates would point the other way. No public development has been identified as the reason traders pulled back on Friday.