Fed Faces Near-Certain Rate Hike by Year-End Amid Inflation Concerns
The Federal Reserve is facing a high likelihood of raising interest rates by year-end 2026. The CME FedWatch Tool shows a 90% probability of at least one rate hike before December 31, 2026.
This figure has risen due to persistent inflation data that's reshaping market expectations around monetary policy. Inflation releases have rattled investors who had hoped for cooling price pressures.
BMO Capital Markets senior economist Jennifer Lee disagrees with the majority view, arguing that the Fed will hold rates steady through 2026. She believes any rate cuts won't arrive until the fourth quarter of 2027 at the earliest.
The change in leadership at the Fed, with Kevin Warsh taking over as chair in May 2026, has brought a hawkish tilt to the institution. The June 2026 FOMC dot-plot showed a divided committee, with nine out of 18 members indicating they expect at least one rate increase by year-end.