Fed Rate Hike Odds Reach 90%, Markets Expect 25bps Increase

The Federal Reserve's (Fed) decision on interest rates is expected to be announced on Wednesday, September 15th, at 2 pm ET. The market is heavily biased towards a rate hike of 25 basis points (bps) to +3.75-4.00%, with the odds currently standing at +90%. This would be the first move on rates since December last year.

The high inflation levels, brought about by tariff policy and oil prices since the war with Iran, have taken a toll on the economy. The 10-year and 30-year bond yields are now above +5%, while the 2-year yield is at +4.65%, which is still 90 bps above the current interest rates.

Fed Chair Kevin Warsh may vote to keep rates steady, given his past stance on the matter. However, with Powell and Cook expected to vote for a rate hike, it would require only two more votes to reach the necessary quorum of seven. Fed Governors Bowman and Paulson are the remaining active voters, but their leanings are uncertain.