Markets Price in 60% Probability of September Rate Hike as Inflation Concerns Grow

The Federal Reserve's interest-rate outlook has shifted sharply, with markets now pricing in a roughly 60% probability of another rate increase in September.

This represents a significant change from earlier assumptions that the next major move could be toward lower borrowing costs.

The shift follows a more hawkish message from Federal Reserve Chair Kevin Warsh, who emphasized that inflation remains above the central bank's 2% objective and that policymakers cannot assume inflation will automatically return to target.

US Treasury yields have moved higher, the US dollar has strengthened, global bond markets have come under pressure, and equity investors have become more cautious in response to the changing expectations.