Traders see 34% chance of 100 basis point rate hike by Federal Reserve next week

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An unexpectedly hot consumer-price index report for August has fed funds futures traders boosting the likelihood of a jumbo-size 100 basis point rate hike by the U.S. central bank to 34%, up from zero chance on Monday. Such a hike would take the fed funds rate target to between 3.25% and 3.5%, from a current level between 2.25% and 2.5%. Meanwhile, the chance of a 75-basis-point hike dropped to 66% from 91% on Monday. The readjustment in rate-hike expectations came as U.S. stocks dropped sharply, leaving Dow industrials DJIA, -3.94% down by more than 1,200 points in the final hour of trading on Tuesday, and as economists at Nomura Securities also predicted a full one-percentage increase in the Fed’s benchmark short-term rate.

This article was originally published by Marketwatch.com. Read the original article here.

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