Markets raise odds for Federal Reserve rate hike after inflation report
The rate cut party that markets spent all of 2024 anticipating has officially been uninvited. Fresh inflation data has pushed traders to price in something that seemed unthinkable just months ago: the Federal Reserve might actually raise interest rates. US headline CPI climbed to 3.8% year-over-year in April, hitting a nearly three-year high. Paired with March‘s PCE reading, the Fed’s preferred inflation gauge, showing headline inflation at 3.5% and core PCE at 3.2%, the picture becomes harder to ignore. The pivot from pivot Market predictions currently indicate a 44% chance of a Fed rate hike before July 2027. Perhaps more telling, traders see no cuts happening before that date either. Chicago Fed President Austan Goolsbee has acknowledged that rate hikes are now on the table as a policy option. Thats notable because Goolsbee has generally been considered one of the more dovish voices on the Federal Open Market Committee. The shift represents a complete reversal from where markets stood entering 2024, when futures were pricing in as many as six rate cuts. Oil, geopolitics, and the inflation feedback loop The inflation resurgence isnt happening in a vacuum. Energy prices have surged due to geopolitical tensions stemming from conflict involving Iran, sending oil costs higher and creating the









