Markets turn hawkish as inflation surge pushes December Fed hike pricing

Traders in fed funds futures now price a Federal Reserve rate hike as the next move, with December odds near 51%, January about 60%, and March above 71%, per CME Group’s FedWatch, in response to a week of multiyear inflation highs. The shift raises expectations of higher policy rates into 2027, even as some commentary—including former Fed governor Kevin Warsh’s view that rates could be lowered in the current environment—adds policy uncertainty after dissent at the last FOMC meeting over hints of rate cuts.