Prediction markets cut the probability of a December Federal Reserve interest rate hike to between 65% and 67% from above 80% on Nov 5 after Democrats swept Congress in the US midterm elections and technology stocks sold off. The repricing lifted the implied chance of the central bank holding its benchmark rate steady in December to 33%, the highest since mid-September.
Ahead of the vote, Fed funds futures on Nov 3 priced in a full rate increase by January with a 77% chance of a move in December, as consumer, producer and PCE inflation readings rose. Cleveland Fed President Beth Hammack, one of two officials who dissented in favor of a quarter-point hike when the central bank held its benchmark rate at 3.75% to 4.00% on Oct 28, said on Nov 5 that inflation has been too high and is “moving in wrong direction.”