Fed rate-hike probability rises to 75% for December as inflation indicators rebound; market expectations shift from three 2026 cuts to sustained higher rates.
Macro & Markets ·
Market expectations have shifted sharply toward Federal Reserve tightening. Traders are now pricing in a 75% probability of an interest-rate increase in December, a reversal driven by rebounds in consumer-price, producer-price, and personal-consumption-expenditure inflation metrics according to market pricing data.
The swing reflects a dramatic recalibration of longer-term Fed policy. Twelve months prior, market participants had anticipated at least three rate cuts during 2026. That expectation has now given way to a scenario of persistently elevated rates, a dynamic market participants have characterized as "higher for longer."
It remains unclear whether the recent inflation rebound signals a sustained trend or temporary volatility, and how aggressively the Fed will respond in subsequent months beyond December. The broader implications for 2026 rate-cut expectations and the timeline for eventual easing cycles are still being priced in.