Markets now price a 90% probability that the Federal Reserve raises interest rates at least once before the end of 2026, according to the CME FedWatch Tool. The shift follows hot inflation data, a hawkish new Fed chair, and a Treasury market where the 10-year yield is flirting with 5%.
CME FedWatch data reshapes the outlook
The Federal Reserve is staring down a 90% probability of raising interest rates at least once before the end of 2026, the CME FedWatch Tool shows, as persistent inflation data reshapes expectations around monetary policy. Not everyone agrees. BMO Capital Markets senior economist Jennifer Lee has consistently argued the Fed will hold rates steady through 2026, with cuts not arriving until the fourth quarter of 2027 at the earliest.
Bank of America takes the opposite view, projecting three separate 25-basis-point hikes in 2026 that would push rates to the 4.25–4.50% range. Kevin Warsh, who became Fed chair in May 2026, has brought a hawkish tilt to the institution, and the June 2026 FOMC dot-plot showed nine of the 18 members expect at least one rate increase by year-end.
Inflation data seals the case for September 16
The debate comes to a head at the Federal Open Market Committee meeting wrapping up on September 16. Fund manager Chris Versace says the next move is likely a hike rather than a cut, pointing to August headline inflation of 3.4%, with core CPI at 2.4%. According to Versace: "It's hard to not see the Fed delivering a 25-basis point rate hike."
Treasury yields flash a separate warning
Meanwhile, the 10-year Treasury yield climbed to 4.943% on September 10, its highest level since October 2023, while the 30-year yield touched 5.37%, a level not seen since 2001. Markets are pricing in roughly a 67-72% probability of a Federal Reserve rate hike at the September 16 meeting.
Rising yields are already reaching consumers. The average mortgage rate hit 7% this past week, while new credit cards charge an average of 23.82%, according to LendingTree. Higher borrowing costs squeeze spending, but that is the exact mechanism the Fed relies on to bring inflation back toward its target.
Sources: Crypto Briefing, TheStreet via Yahoo Finance, Crypto Briefing
Trading involves risk.
Risk Disclaimer
