Fed Hike Odds Near 90% as Markets Prepare for Rate Decision

The Federal Reserve is set to raise interest rates for the first time since July 2023. With inflation data coming in hotter than expected, markets now assign around 86.5% to 90% odds to a 25 basis-point increase at the September 15-16 meeting.

August core inflation came in at 0.3% month-on-month, with the largest increase since April due to services rather than energy. Employment data also showed an unexpected gain of +162,000 jobs against expectations of +56,000.

The dollar is holding near 99, gold has just posted its third straight weekly loss, and the S&P 500 is drifting below 7,650 into the decision.

While a hike itself is close to fully priced, the marginal information comes from how many 2026 increases the committee is willing to signal. A hawkish dot plot could push the 10-year Treasury yield toward 5%, while a dovish read could send the dollar lower and gold higher on short-covering.