Markets Eye Fed Rate Hike by Year End After Hot Data
Traders have increased bets on a January interest rate hike to 60 percent following higher than expected consumer and wholesale inflation readings. This shift presents a policy challenge for incoming Fed Chair Kevin Warsh as officials debate removing the central bank's current easing bias.
Investors in the United States increased bets on a 25-basis-point interest rate hike by January following hot inflation data on Friday. The CME FedWatch tool now shows a 60% probability of a rate increase by the turn of the year, with December seen as a coin toss. This shift challenges incoming Chair Kevin Warsh's dovish productivity thesis as he prepares to lead the central bank.
Consumer, wholesale, and import prices all exceeded economist forecasts this week. Retail sales remained resilient despite price pressures reaching their highest levels since the post-pandemic wave. Energy prices rose amid the U.S.-Israeli-led conflict escalation.
