US government debt sold off on Thursday as investors priced in more aggressive policy tightening by the Federal Reserve this year after chair Jay Powell said that a jumbo interest rate increase would be considered at the central bank’s May meeting.
Powell, in a panel discussion at the IMF on Thursday said that it was appropriate to move “a little more quickly” in the central bank’s fight against inflation, and explicitly said that a 0.5 percentage point interest rate increase was on the table in May.
The futures market has priced in a 0.5 percentage point increase at each of the next three meetings in May, June and July. The market is betting that the Fed’s policy rate will be 2.7 per cent by the end of this year, from a little over 0.25 per cent today.