Fed swaps no longer fully price in a september rate hike, per Bloomberg

Federal funds swaps are indicating a shift in market sentiment regarding the Federal Reserve’s next potential interest rate hike, according to Bloomberg. The data shows that swaps are no longer fully pricing in a rate hike for September, reflecting changing expectations among market participants. This development follows recent economic data and Federal Reserve guidance that have contributed to a reassessment of the likelihood of a September increase. The current federal funds target range remains at 3.50%–3.75%, as decided in June 2026. The market had previously shown a higher probability of a rate hike in September, but recent cooler inflation data appears to have influenced expectations significantly. This alteration in swap pricing aligns with the broader market sentiment that now suggests a pause may be more likely, aligning with a potential “Pause–Pause–Pause” scenario for the Federal Reserve’s policy decisions from June to September. Key Takeaways Market data suggests reduced confidence in a September rate hike, based on current swap pricing. Recent inflation data and Federal Reserve communications appear to have influenced a shift towards expecting a pause in rate hikes. Th...