Investing.com – After Federal Reserve (Fed) Bank of New York chief William Dudley suggested on Tuesday that a rate hike in September was “possible”, financial markets once again priced in the possibility that the U.S. central bank could tighten monetary policy at the end of the year.
Dudley, a voting member on policy decisions, said in an interview with Fox Business Network that the Fed was “getting closer to that point in time when it will be appropriate to actually raise short-term rates again.”
Fed fund futures doubled the odds on a September hike to 18% on Tuesday, compared to just 9% the prior day, according to CME Group’s FedWatch tool.
The probability of a hike in December switched to 51.4%, compared to just 41.9% on Monday.
Before the appearance, markets had not been pricing in an increase until the May 2017 decision.
Dudley’s stance was similar to one given near the beginning of the month in which he warned that market views on rates were too pessimistic.
Later on Tuesday, market participants will hear remarks from both Atlanta Fed president Dennis Lockhart and St. Louis Fed chief James Bullard.
With traders also looking ahead to Wednesday’s release of the minutes from the last Fed policy meeting, UBS said in a note that they expect the document to be paving the way for a rate hike at the December meeting.
These analysts further expected Fed chair Janet Yellen’s August 26 speech at the Jackson Hole Economic Symposium to set the stage for a return to monetary policy normalization at the end of the year.