The bond market has repriced expectations, now showing a 37 percent probability of a Federal Reserve rate hike before the end of 2026. That's a dramatic shift from just weeks ago, as rising inflation and geopolitical tensions with Iran push oil prices higher.
The Federal Reserve has held its benchmark rate steady in the 3.50 to 3.75 percent range since December. Chair Jerome Powell and the FOMC have taken a cautious stance, warning that rate hikes remain a viable policy option. Service sector inflation is accelerating, and tariff-related cost increases are adding to the pressure, raising the risk of stagflation.
Meanwhile, the probability of a rate cut this year has collapsed to just three percent. Markets now see the central bank's next move as far more likely to be a tightening than an easing. All eyes are on the next FOMC meeting, upcoming CPI data, and any new developments in the Middle East.