Markets price 93% chance of Fed rate hike today, first since 2023

The Federal Reserve appears poised to do something it hasn’t done in over three years: raise interest rates. CME FedWatch and interest-rate swaps markets are assigning a 90-94% probability to a 25-basis-point hike at today’s FOMC meeting, a dramatic shift from roughly 36% just one month ago. If the Fed follows through, the federal funds target range would climb to 3.75%-4.00%. That would mark a sharp reversal for a central bank that spent the past several years methodically cutting rates, delivering six reductions totaling 175 basis points since its last hike in July 2023. What changed so fast Inflation remains stubbornly above the Fed’s 2% target. Oil prices have surged past $100 per barrel, fueled by escalating US-Iran geopolitical tensions that have squeezed global energy supply. Chair Kevin Warsh’s performance at the Jackson Hole symposium in late August carried a distinctly hawkish tone, signaling that the central bank was prepared to act if inflation refused to cooperate. Markets took the hint. Resilient employment data has undercut any argument that the economy needs continued monetary support. Bond markets are already feeling it The 10-year Treasury yield has breached 5%, r...