(Bloomberg) -- Swap markets show traders are now pricing in a significant possibility that the Federal Reserve will implement a 100-basis-point hike in July in the wake of hotter-than-anticipated inflation data.
The rate on the July contract rose as high as 2.416% after the consumer-price inflation data, some 83.6 basis points above the current effective fed funds rate. That implies a hike of at least 75 basis points is seen as definite and around a one-in-three chance that it could be a full percentage point. The market had already shifted earlier in the day to fully price in a 75-basis-point increase.
The market also moved to almost fully price in a total of 1.5 percentage points of increases over the July and September meetings, while expectations for where the fed benchmark will max out in the first part of 2023 jumped to around 3.6%.
The consumer price index rose 9.1% from a year earlier in a broad-based advance, the largest gain since the end of 1981, Labor Department data showed Wednesday. The widely followed inflation gauge increased 1.3% from a month earlier, the most since 2005, reflecting higher gasoline, shelter and food costs. Economists projected a 1.1% rise from May and an 8.8% year-over-year increase, based on the Bloomberg survey medians.
Treasury yields rose across the curve, although more at the short end, and the dollar jumped too, sending the euro below parity with the greenback for the first time in two decades.
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