Hike odds rise; Waller signals end to easing bias
Key Questions
What are the current odds of a December Fed rate hike?
Money markets have priced in a 54% chance of a rate hike in December, up from 30% a week ago. This shift follows hawkish Fed minutes and rising inflation concerns.
What did Fed Governor Christopher Waller say about the easing bias?
Waller indicated he is ready to remove the 'easing bias' from Fed communications, calling rate-cut talk 'crazy' in the current environment. He noted the next move is as likely to be a hike as a cut.
How are bond markets reacting to the latest Fed signals?
Bond yields have jumped as markets reprice for higher-for-longer rates. Traders are interpreting the moves as a signal that current rates may not be high enough.
What drove the increase in rate-hike probabilities?
Hawkish Fed minutes and persistent inflation risks prompted the repricing. Markets are also reacting to comments from officials like Waller signaling a policy shift.
How has gold performed amid the rising hike bets?
Gold prices have fallen and are hovering near a one-and-a-half-month low. The decline is driven by increased expectations of tighter monetary policy.
What is the impact on the dollar from these developments?
The dollar has held near six-week highs, supported by Iran-related geopolitical tensions and shifting rate expectations. The greenback remains steady against most major currencies.
What are analysts saying about the Fed's policy path through 2026?
Morgan Stanley and other forecasts suggest the Fed may keep rates unchanged through 2026 due to inflation risks. Some projections include possible cuts only in 2027.
How have Fed minutes influenced market expectations?
The minutes showed increased chances of a rate hike later this year and prompted a rapid shift in derivative pricing. Traders now see a growing probability of tighter policy.
Hike bets now 2-in-3 for Oct after Waller calls rate-cut talk 'crazy' and pushes to drop easing bias. Yields jump as markets reprice higher-for-longer. Dec odds at 54% earlier.