Futures fall as Fed signals more rate hikes

NEW YORK (June 15) U.S. stock index futures edged lower on Thursday as the Federal Reserve signaled that interest rates could increase further this year after it skipped raising them in its latest meet.

The Fed, which left rates unchanged at the 5%-5.25% range on Wednesday, indicated that borrowing costs could rise by at least half a percentage point this year as inflation remains stubbornly persistent and the U.S. economy remains resilient.

Traders now see a 72% chance of a 25-basis-point rate hike in July, up from around 60% odds a day earlier, according to the CME Fedwatch tool.

"Powell expressed that the committee seemed surprised about the resilience of current inflation even if Tuesday's CPI print showed a continued slowing in the headline inflation rate," said Charles Hepworth, investment director at GAM Investments.

"Admitting to being surprised that the Fed’s policy to date hasn’t cooled a hot jobs market is basically signaling higher rates are indeed even more necessary and can be withstood by the economy as it glides (to) a soft landing."

Investors will watch out for a slew of economic data due later in the day, including the initial jobless claims for the week ended June 10 and retail sales for May.

U.S. stock indexes ended mixed on Wednesday as Fed comments dented investor optimism sparked by recent data showing signs of cooling inflation.

Reuters