(Bloomberg) -- The market for wagers on the Federal Reserve’s policy rate fully priced in a fourth consecutive three-quarter point increase at the central bank’s next meeting on Nov. 2 after consumer prices rose more than forecast in September.
The rate on the November overnight index swap contract rose to 3.86%, more than 75 basis points above the current effective fed funds rate. It previously peaked at 3.813% on Friday after stronger-than-expected September employment data.
The market also priced in a higher eventual peak for the policy rate, with the March 2023 contract touching 4.864%.
The CPI data was “clearly a shock for the markets and the markets are off because of it,” Seth Carpenter, chief global economist at Morgan Stanley said on Bloomberg television. “There is persistence, particularly in the services side of inflation.”
Excluding food and energy, the Consumer Price Index increased 6.6% from a year ago, the highest level since 1982, Labor Department data showed Thursday. From a month earlier, the core CPI climbed 0.6% for a second straight month.
The Fed has raised its policy rate five times since March, most recently to a range of 3%-3.25% in September, after dropping the lower bound to 0% two years earlier at the onset of the pandemic.
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