Traders see over 66% chance of Federal Reserve rate hike at September meeting

The odds of a Federal Reserve rate hike this month have jumped past 66%, according to federal funds futures trading as of September 1. That figure represents a sharp climb from where markets stood just a week earlier, when probabilities hovered in the 35-57% range. The catalyst is no mystery. Fed Chair Kevin Warsh took the podium at the Jackson Hole Economic Symposium on August 28 and delivered remarks that left very little room for interpretation. Inflation, he said, remains a problem that demands action. Warsh’s Jackson Hole pivot The core message from Warsh was blunt: the Fed’s preferred inflation gauge is sitting at 3.7%, nearly double the central bank’s 2% target. That gap isn’t narrowing fast enough for comfort. Warsh emphasized that restoring price stability requires concrete measures, not patience. Before Jackson Hole, rate hike expectations had actually been softening. Weak July employment numbers pushed the implied probability of a September hike down to as low as 30% at one point. Traders were starting to price in the possibility that the Fed might hold steady, letting economic cooling do some of the work. Then Warsh spoke, and that narrative collapsed in about 48 hours....