Fed Hike Odds Surge to 73% as Inflation Hits Four-Year High
Markets now assign a 73% probability to a Federal Reserve interest rate hike at the October 27-28 meeting, driven by hawkish comments from Fed Governor Michael Barr and new data showing inflation at its highest level in nearly four years. S&P Global reported that manufacturing and services activity indices reached multi-year peaks, with input costs rising at the steepest rate in four years due to higher fuel and transportation expenses. The 2-year Treasury yield climbed over 13 basis points to 4.9% following the news. This follows a unanimous 25-basis-point rate increase last week, which raised the benchmark rate to a target range of 3.75%-4%. While the Fed’s Summary of Economic Projections centered on one additional hike this year, market expectations have shifted toward a more aggressive tightening cycle, with some officials suggesting the committee is 'out of position' on rates.
