Traders are considering the possibility that Fed policy makers will deliver a smaller-than-expected 50-basis-point rate hike next week, instead of the widely expected 75-basis-point increase. The chance of a half-point hike was as high as 11% on Thursday, up from 1.6% a week ago. Meanwhile, the likelihood of a 75-basis-point hike has dropped to 89%, down from 98% on Oct. 20, according to the CME FedWatch Tool. The scenario of a less aggressive move comes after what observers perceived as a dovish tone in the European Central Bank’s rate outlook on Thursday, and Wednesday’s smaller-than-expected rate hike by the Bank of Canada. The fed funds rate target currently sits between 3% and 3.25% after three straight 75-basis point hikes.
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