Traders are continuing to tweak their expectations for US interest rates as the Federal Reserve meets and have now begun to anticipate the central bank’s policy rate peaking in September rather than July.

The latest calculations extend Tuesday’s more dramatic reassessment sparked by May inflation readings that were more benign than expected. Those led to a drop in wagers on a hike at the meeting that concludes at 2 p.m. in Washington as well as a paring of bets that the Fed will lower rates at any point this year.

The Fed’s target range for the federal funds rate — which it is seen leaving unchanged at 5%-5.25% — has resulted in an actual rate of 5.08%. The highest rate on swap contracts for future meetings was about 5.27% in September on Wednesday, with the one for July at 5.26%. As recently as Tuesday, July’s rate was higher.

While both contracts price more than 70% odds of a quarter-point increase, the higher rate for September suggests traders see a small chance of it being delayed until that month. Upcoming Fed meetings are scheduled for July 26 and Sept. 20.

The minority view that the Fed might raise rates in June got beaten up Tuesday by May inflation data that showed more deceleration than expected. However the view that rate cuts are possible during the second half of the year was also damaged, as inflation remains well above the Fed’s 2% target. The December contract’s rate at 5.13% continues to price in about half of a rate cut from the expected peak.

The prospect of a hawkish policy outlook from Fed officials via their latest Summary of Economic Projections — to be released Wednesday with the rate decision — has driven short-term Treasury note yields to their highest levels since March.

“It seems likely, and will be articulated in the SEP, the Fed has more work to do,” said Gregory Faranello, head of US rates trading and strategy for AmeriVet Securities. But a pause in June doesn’t necessarily mean a hike in July if economic trends are sustained, he said.

Front-end Treasury yields dipped in US trading Wednesday following the release of additional inflation data for wholesale prices, which also slowed more than economists had estimated. The two-year retreated to around 4.61% from Tuesday’s high of 4.70%, the five-year to 3.95%. UK government bond yields also declined after some soared to multiyear highs on Tuesday as strong labor-market data drove up expectations for Bank of England rate increases.

--With assistance from Liz Capo McCormick and Edward Bolingbroke.

(Adds detail in fourth paragraph, updates rate levels.)