Federal Reserve takes a more hawkish stance

At the recently concluded Federal Open Market Committee meeting, the Fed released its projections of short-term interest rates. Eight FOMC participants expect the fed funds rate to land at 4.125% and nine at 4.375% this year. With Wednesday's 75-basis-point hike, the rate's currently targeted at 3% to 3.25%.

Looking to next year, participants were split, projecting a 4.375%, 4.625% and 4.875% rate. There was one member that anticipates a 3.875% rate.

In June, eight participants expected a 3.375% fed funds rate by the end of 2022. Five predicted short-term rates of 3.125% and four believed they would increase to 3.625%.

Using the CME FedWatch Tool, market participants are attaching a 32.5% probability that rates will increase to a 4.25% to 4.5% range by December 2023.