Odds surge for hike as oil rips higher
Rising oil prices and strong employment data are fueling market expectations for a Federal Reserve interest rate hike. Investors are increasingly concerned that inflation will accelerate, prompting a shift in monetary policy outlook.
Why it matters
Shifting interest rate expectations directly impact stock market volatility and borrowing costs for consumers and businesses.
Investors are increasingly preparing for the Federal Reserve to hike interest rates as oil prices climb.
Fed funds futures are pricing in a roughly 82% likelihood that the central bank lifts borrowing costs at its September policy meeting, according to CME's FedWatch tool. A week ago, those odds sat below 53%.
The central bank is still broadly expected to keep rates unchanged at the current 3.50% to 3.75% at its gathering next week. But even then, there's a growing minority planning for an increase: Fed funds futures trading indicates a nearly 38% probability of a quarter percentage point hike, up from less than 12% a week ago.
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