US Economic Data Boosts Rate Hike Expectations, Volatility Spikes

A recent surge in US economic data has led to increased expectations for Federal Reserve rate hikes, causing market volatility across stocks, bonds, and cryptocurrencies. The September flash U.S. Composite PMI climbed to 58.4, its strongest pace in over five years, indicating rapid business activity growth.

The stronger-than-expected PMI report also showed faster employment growth, rising backlogs, and continued expansion across the private sector. This data reinforced concerns about inflationary pressures, with business input costs increasing at their fastest pace in nearly four years.

As a result, traders began to increase expectations for another rate hike at the October meeting, pushing the implied probability of an additional increase toward 75%. The combination of strong growth and higher costs has led investors to reassess their outlook for future liquidity and risk tolerance.