Fed Hike Odds Plummet as Markets Expect Steady Rates

Markets are closely watching the Federal Reserve's policy move at its upcoming FOMC meeting, scheduled for September 15-16. According to data from the CME FedWatch tool, markets are nearly evenly split between a rate hike and holding interest rates steady.

Federal Reserve Governor Christopher Waller indicated that he is leaning toward holding interest rates steady if inflation data shows price pressures continuing to moderate. The Consumer Price Index for August is expected to be released on September 11.

Tom Lee, head of research at Fundstrat, believes that amid the possibility of a lower inflation print next week, 'the odds of a September hike might actually drop to zero.' He also stated that if both the jobs report and CPI report are weaker, the market won't price in a rate hike.

A poll on Stocktwits showed that 47% of respondents expect zero rate hikes this year, while 34% expect one rate hike. The odds of a September hike have dropped significantly, with data showing a 50.6% probability of holding rates steady and a 49.4% probability of a 25 basis point hike.

Not everyone agrees that the chances of a rate hike are slim. Peter Schiff said that if inflation comes in hot, Waller would consider a rate hike, but that's not the same as committing to an actual rate hike.