Bond traders are wiping out bets that the Federal Reserve will lower interest rates this year after the central bank held its key rates steady and signaled more monetary tightening would likely follow to cool inflation.

Rates on swap contracts referencing future Fed policy meetings now reflect a peak rate of 5.32% in September, while the December 2023 contract’s rate jumped to about 5.23%. As recently as Wednesday morning, the December rate was about 15 basis points below the expected peak, implying most of a quarter-point rate cut. Longer-dated contracts continue to anticipate easing in 2024.

The view that the Fed would shift to cutting rates this year was well-entrenched until recently. In early April, as US regional bank shares slumped after several institutions failed, about three quarter-point cuts were priced in. It has eroded amid surprising resilient US labor-market indicators and inflation readings still well above the Fed’s target.

The Fed left its policy rate unchanged at 5%-5.25% Wednesday after 10 consecutive increases, as most forecasters expected. Revised quarterly forecasts for the economy and monetary policy, however, showed officials expect to resume tightening to cool inflation, projecting more increases than economists and investors expected.

Officials’ offered a median forecast of 5.6% in their so-called dot plot for the end of 2023, signaling an additional 50 basis points of tightening this year. That compared to the 5.1% median in the March dot plot.

“If you are going to move the dot plot 50 basis points higher, then the intent would be to tighten financial conditions, which is what we are seeing,” Michael Gapen, head of US economics at Bank of America, said on Bloomberg Television.

Read More: Fed Dot Plot Offers Clues on Appropriate Pace of Change

--With assistance from Anya Andrianova.

(Adds context, analyst comment throughout.)