U.S. rate futures lift chances of 100-bps hike in July Fed meeting after hot CPI data

An eagle tops the U.S. Federal Reserve building's facade in Washington
An eagle tops the U.S. Federal Reserve building's facade in Washington, July 31, 2013. REUTERS/Jonathan Ernst

NEW YORK, July 13 (Reuters) - Futures on the federal funds rate have increased the chances of a full percentage-point hike at the Federal Reserve meeting later this month after a hotter-than-expected U.S. annual inflation print.

The Labor Department's report showed the Consumer Price Index (CPI) rose in June on both a monthly and annual basis by 1.3% and 9.1%, respectively. read more

Prior to the release of the CPI data, fed funds futures had priced just a 0.2% chance of a 100 basis-point hike this month. After the CPI data was released, that percentage surged to 33% immediately and was last at 28%. The market though still expects the Fed to raise the rate by 75 bps, with a 72% chance attached.

The so-called "core" CPI, which excludes volatile food and energy prices, rose 5.9% year-on-year.

A Reuters poll showed year-on-year CPI in June had been estimated to come in at 8.8%, while the monthly core index was expected to have eased to 5.8% from 6.0% in May.

By the end of the year, the futures market has factored in a fed funds rate of 3.6% after the data, from 3.41% just before. The current fed funds rate is at 1.58%.

Reporting by Gertrude Chavez-Dreyfuss Editing by Chizu Nomiyama

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