In the swap market, the Fed’s 25 basis point rate hike next week is priced at 100 percent.
The rate rose to 5.33 percent on swap contracts associated with the Fed’s July 26 meeting, 25 basis points above the current effective funding rate of 5.08 percent.
With the signs of a slowdown in inflation, the expectation of a peak level in the policy rate declined.
But most Fed officials have made hawkish rhetoric about this month’s meeting in recent days.
The bank, which has been increasing interest rates for 10 consecutive months, suspended interest increases last month. Policy makers had predicted an increase of 25 basis points for 2 more times this year in their median projections.
San Francisco Fed President Mary Daly said last week it was too early to say they had taken enough action to restore price stability. Fed Manager Christopher Waller also said that there should be two more rate hikes this year for inflation to return to the target level.