Markets Now Assign Over 90% Odds of a Fed Rate Hike in September
Market expectations have shifted dramatically as the probability of a Federal Reserve rate hike at its upcoming meeting has risen to over 91%, according to CME Group's FedWatch tool. This marks a reversal from earlier forecasts that anticipated cuts, driven by persistent inflation and strong employment data. Inflation remains elevated with headline CPI rising 3.4% year-over-year in August, while core CPI increased 2.4%. Producer prices were even hotter at 5.4%, further complicating the Fed's dual mandate. The latest jobs report showed a surge of 162,000 nonfarm payrolls for August—far above the 12-month average—and oil prices have climbed over $100 per barrel due to attacks on Saudi infrastructure. These developments remove any justification for delaying rate increases and raise concerns about inflation becoming more entrenched. Investors are bracing not just for a September hike but also potential additional tightening in early 2027, which could pressure long-duration assets like bonds and high-growth stocks.
Tickers: $CME
Topics: Federal Reserve inflation interest rates labor market