Rate Hike Odds Soar to 65-68% as Fed Signals Imminent Action
The Federal Reserve has signaled a likely rate hike in September, with odds at approximately 65-68% according to CME FedWatch. This would be the first increase since June and marks a significant shift from the roughly 36% priced in before Fed Chair Kevin Warsh's Jackson Hole address last Friday.
The 10-year Treasury yield has risen to its highest level since January 2025, reaching approximately 4.79%. This increase is having an impact on variable-rate borrowers and mortgage applicants, with a five-day window between now and the September 16 FOMC decision.
Warsh's speech at Jackson Hole marked a change in approach for the Fed, abandoning its traditional 'reaction function' and instead emphasizing discipline over decision-making. This means that markets will have to interpret each data point through the lens of Warsh's commitment to bringing inflation back down to 2%.