Federal Reserve faces 90% chance of rate hike by year-end, CME FedWatch shows

The Federal Reserve is staring down a 90% probability of raising interest rates at least once before the end of 2026, according to the CME FedWatch Tool, as persistent inflation data reshapes market expectations around monetary policy. That figure has surged following recent inflation releases that rattled investors who had been hoping price pressures were finally cooling. BMO Capital Markets senior economist Jennifer Lee is not buying it. A tale of two forecasts Lee has consistently argued that the Fed will hold rates steady through 2026, with any cuts not arriving until the fourth quarter of 2027 at the earliest. Bank of America has gone further, projecting three separate 25-basis-point hikes in 2026, which would push rates to the 4.25–4.50% range. BMO acknowledges the potential for hikes if data trends shift materially, but maintains the base case is a hold. New leadership, hawkish signals Part of what is driving market anxiety is a change at the top of the Fed. Kevin Warsh, who took over as chair in May 2026, has brought a distinctly hawkish tilt to the institution. The June 2026 FOMC dot-plot offered a concrete illustration of how divided the committee has become. Nine of the ...