Despite Falling Oil Prices, There's Now a 73% Chance of an Interest Rate Hike by September -- Here Are the 2 Culprits to Blame
Despite falling oil prices, the probability of a Federal Reserve interest rate hike by September has risen to 73% due to persistent inflation and specific economic policies. The article identifies core inflation and policy-driven economic pressures as the primary drivers behind this shift in market expectations.
Why it matters
Rising interest rates have broad implications for stock market performance, borrowing costs, and overall economic stability in the United States.
Although the Dow Jones Industrial Average ( ^DJI +0.29% ) , S&P 500 ( ^GSPC +0.38% ) , and Nasdaq Composite ( ^IXIC +0.62% ) have all notched record-closing highs since early June, trouble is brewing on Wall Street.
In May, trailing 12-month U.S. inflation surged to a three-year high of 4.2%, spurred by the inflationary effects of the Iran war. While the stock market has thus far been able to climb this wall of worry, the probability of the Federal Reserve raising interest rates has risen sharply.
Fed Chair Kevin Warsh delivering remarks. Image source: Official Federal Reserve Photo.
On June 12, there was just a 26% chance that the Fed would hike the federal funds target rate by the Federal Open Market Committee's (FOMC) Sept. 16 meeting. As of July 12, this probability has risen to 73%, according to the CME Group 's FedWatch Tool.
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