Wall Street expects Fed rate hike for first time in three years; markets have priced it in but political implications may run deeper.
Macro & Markets ·
Financial markets are pricing in a 94.5% probability that the Federal Reserve will raise rates by 25 basis points this week, marking the first increase since 2023, according to CME's FedWatch tool. Nearly every major bank surveyed by the Wall Street Journal expects the move, with most forecasting 50 basis points of additional tightening by year-end, though Bank of America, Deutsche Bank, and RBC are projecting 75 basis points. The timing creates political tension: President Trump, who appointed Fed Chair Kevin Warsh and publicly advocated for rate cuts over the past two weeks, has opposed the hike, while the Fed cites persistent inflation running at 3.4% annually and core inflation at 2.5%, both above the central bank's 2% target.