Fed Rate Hike Odds Rise Ahead of Mid-Term Elections

The US Federal Reserve may raise interest rates again in October, ahead of the mid-term elections, despite its historical tendency to hold off on rate hikes during election periods. The futures market is pricing in a 73% probability of a rate hike at the Fed's upcoming meeting, up from 50% the previous day.

The strong US economy continues to defy expectations of slowdown and rising interest rates. The composite PMI index rose to 58.4 in September, marking the fastest expansion since July 2021 and accelerating growth for the fourth consecutive month.

Michael Barr, a Fed board member, stated that 'further adjustments to monetary policy will likely be necessary' to keep inflation under control, as the risks of achieving the inflation target have increased. Against this backdrop, the dollar strengthened by 0.5% globally and bond prices corrected to realign yields with a 'higher for longer' scenario.