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The probability of a Federal Reserve rate hike in December has risen sharply to 77%, up from 24% a month ago, according to the latest market data. This shift follows the June 17, 2026, Federal Open Market Committee (FOMC) meeting where the Fed decided to maintain the current interest rates at 3.50%–3.75%. However, the Fed also revised its median projection for year-end rates to 3.8%, indicating a higher likelihood of a rate increase by the end of the year. The unexpected strength in May’s payroll report is believed to have influenced this change in market expectations. Under the leadership of new Chair Kevin Warsh, nine out of 18 Fed officials now anticipate at least one rate hike before the year concludes.
Key Takeaways
- The sharp increase in December rate hike odds appears to suggest a strong market expectation for a rate hike by the end of 2026.
- Markets appear to interpret recent economic data, particularly the robust May payroll report, as supportive of a December rate hike.
- The increase in rate hike odds is consistent with the Fed’s revised projection for higher year-end rates under Chair Kevin Warsh.
What to Watch
Market participants will be closely monitoring upcoming economic indicators, particularly inflation and employment data, for indications that could confirm or challenge the likelihood of a December rate hike. The next FOMC meeting in July will be a critical event, as any changes in Fed communication or economic projections could impact market expectations. Additionally, statements from Fed officials, especially Chair Kevin Warsh, will be scrutinized for any indication of policy shifts.
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Disclosure: This article was edited by Estefano Gomez. For more information on how we create and review content, see our Editorial Policy.
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