An unexpectedly hot consumer-price index report for August has fed funds futures traders boosting the likelihood of a jumbo-size 100 basis point rate hike by the U.S. central bank to 34%, up from zero chance on Monday. Such a hike would take the fed funds rate target to between 3.25% and 3.5%, from a current level between 2.25% and 2.5%. Meanwhile, the chance of a 75-basis-point hike dropped to 66% from 91% on Monday. The readjustment in rate-hike expectations came as U.S. stocks dropped sharply, leaving Dow industrials down by more than 1,200 points in the final hour of trading on Tuesday, and as economists at Nomura Securities also predicted a full one-percentage increase in the Fed’s benchmark short-term rate.
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