Fed Rate Hike Odds Tumble Amid Warsh Confusion and Mideast Tensions

The market is expecting the Federal Reserve to keep interest rates at 3.5%, 3.75%, despite the uncertainty caused by Kevin Warsh's recent comments.

Warsh, a former Fed governor, has been making changes to the central bank's communication style, which some see as reducing transparency and scrapping 'forward guidance'. This has led to market confusion, with a 32% probability assigned to a 25 basis point rate hike this week.

The Fed's 'dot plot' still suggests one rate rise this year, with nine of the 18 FOMC members projecting this. The new Chair's tone on inflation has been hawkish, showing no willingness to tolerate inflation above target.

In other economic news, energy prices have fallen, allowing yields to ease and gold to recover slightly. However, tensions in the Middle East remain high, with ongoing attacks between the US and Iran potentially affecting global oil supplies.