Markets Predict Rate Hike (Maybe) Yet to Come

The Federal Reserve left interest rates unchanged at its meeting Wednesday. Markets predicted this outcome with a 70 percent probability, while opinions differ if higher rates would be better to rein in inflation or lower rates would be superior to aid the economy – a stance U.S. President Donald Trump has adhered to.

According to the CME FedWatch tool, a rate hike to combat inflation might still be in the cards this year. The likelihood of one is, however, not the highest.

The tool, which predicts the outcome of future FOMC meetings based on 30-day Fed Funds futures prices, says there’s a 65.2-percent chance that the Fed will raise rates to the target range of 3.75 to 4.00 percent in September, exceeding the likeliness of the committee skipping another change.

Further down the line, a benchmark interest rate with an upper limit of 4.00 percent is looking less likely – as of current predictions, this will only be around 40 percent likely by December. The second most probable option, another rate hike, is rated at around 30 percent likely, while a rate cut back down to or a continuation at 3.75 percent stands at approximately 20 percent likeliness. Into 2027, predictions get even murkier, with January looking similar to December and March finally seeing a slight advantage of another hike to a 4.25 percent upper limit. However, a rate remaining at 4.00 is almost as likely at around 35 percent each.