Fed Hike Odds Rise as Oil Prices Soar Past $100

Oil prices surged past $100 for the first time since May, sparking a rapid increase in market expectations of a Fed rate hike at their upcoming meeting on July 29.

The jump in oil prices pushed short-term Treasury yields to multi-month highs and raised the bar for the Federal Reserve to sound relaxed about inflation at the press conference.

While $100 oil does not directly force a rate hike, it puts pressure on the Fed if it lifts inflation expectations and threatens to keep services sticky for longer.

The Fed's reaction function is centered around watching inflation expectations, labor tightness, financial conditions, and global supply and shipping stress.