Inflation-wary US rate options market cautiously prices for 2024 Fed hike

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NEW YORK, April 29 - Options on Secured Overnight Financing Rate futures are showing a higher probability that the Federal Reserve could hike interest rates a quarter percentage point this year and next as U.S. inflation and the labor market remain resilient.

Analysts said it would take a full-blown re-acceleration in inflation for the Fed to tighten again. That is not the baseline scenario for most economists. "And the fact that central bankers have been of the view that they've done enough is being challenged quite aggressively now." "The longer we stay at higher rates and the economy stays strong and inflation sticky, the more investors will question whether the Fed is doing enough," he added.Even so, SOFR futures have priced in about 30 basis points in easing for 2024 .

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