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Fed Rate Hike Odds Surge to 51% by December as Inflation Accelerates

Traders are now betting on interest rate increases rather than cuts for the first time in the current cycle, following a week of unexpectedly strong inflation data. Fed funds futures show a December hike carrying nearly 51% probability, with odds rising to 60% for January and exceeding 71% by March. Both consumer and wholesale inflation hit multi-year highs, while import and export prices reached levels unseen since the previous inflation surge. That earlier period triggered four consecutive rate increases of three-quarter percentage points in 2022. Economists surveyed on Friday raised their second-quarter inflation forecast to 6%, a substantial revision upward. Kevin Warsh takes over as Federal Reserve leader on Friday. Three Fed members dissented at the most recent policy meeting, objecting to language suggesting the next move would be a rate cut.