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Market Pricing Indicates 50% Probability of Fed Rate Hike in September

On August 28, market pricing shows that the probability of a Federal Reserve rate hike in September is now estimated to be around 50%.

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  • Walsh Emphasizes Anti-Inflation Efforts as U.S. Short-Term Treasury Yields Rise

    On August 28, U.S. short-term Treasury yields increased. Federal Reserve Chairman Walsh, in a highly anticipated speech, emphasized the need for the Fed to curb rising consumer prices, alleviating some market concerns about its ability to combat inflation. During Walsh's speech, short-term U.S. Treasuries were sold off while long-term Treasuries rose. The yield on the two-year Treasury increased by 5 basis points to 4.28%, while the 30-year yield fell by 1 basis point to 5.19%. These changes indicate that the market expects the Fed may need to raise short-term rates. Since Walsh's first press conference in June, bond traders have had doubts about his policy stance. At that time, Walsh stressed the need to lower inflation and displayed a hawkish stance. Since the global economy reopened from the pandemic in 2021, U.S. inflation has remained above the Fed's 2% target. However, in July, the Fed kept rates unchanged, and Walsh did not indicate whether a rate hike might occur this year. Subsequently, long-term Treasury yields rose significantly as traders demanded higher returns to compensate for the risks posed by escalating inflation. On Friday, Walsh warned that inflation had not shown meaningful signs of slowing and stated that policymakers must be confident that inflation is improving; otherwise, the central bank 'has work to do.' He also reiterated that policymakers will bring the inflation rate back to the 2% target, emphasizing that this goal is clear and fixed.

  • Walsh Emphasizes Anti-Inflation Efforts as US Short-Term Bond Yields Rise

    On August 28, US short-term Treasury yields increased. Federal Reserve Chairman Walsh, in a highly anticipated speech, emphasized the need for the Fed to curb rising consumer prices, alleviating some market concerns about its ability to combat inflation. During Walsh's speech, short-term US Treasuries were sold off while long-term Treasuries rose. The yield on the two-year Treasury increased by 5 basis points to 4.28%, while the 30-year yield decreased by 1 basis point to 5.19%. These changes indicate that the market expects the Fed may need to raise short-term rates. Since Walsh held his first press conference in June, bond traders have expressed doubts about his policy stance. At that time, Walsh stressed the need to lower inflation and exhibited a hawkish position. Since the global economy reopened from the pandemic in 2021, US inflation has consistently exceeded the Fed's 2% target. However, in July, the Fed maintained interest rates, and Walsh did not indicate whether a rate hike might occur this year. Subsequently, long-term Treasury yields surged as traders demanded higher returns to compensate for the risks posed by rising inflation. Walsh warned on Friday that inflation has not shown meaningful signs of slowing and stated that policymakers must be confident that inflation is improving; otherwise, the central bank 'has work to do.' He also reiterated that policymakers will bring the inflation rate back to the 2% target, emphasizing that this goal is clear and fixed.

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  • Waller Signals Hawkish Stance, Sees No Restrictive Financial Conditions

    On August 28, in a speech that was more hawkish than many market participants expected, Federal Reserve Chairman Kevin Waller cited a series of indicators showing a strong economic condition, including high corporate profits, stable consumer spending, and narrowing credit spreads. Waller stated, "In my view, the credit and loan markets show almost no signs that monetary policy is becoming restrictive. Overall, I find it difficult to describe the current overall financial conditions as restrictive." This statement boosted Wall Street's bets on interest rate hikes by the Federal Reserve.

  • Waller Signals Hawkish Stance, Sees No Restrictive Financial Conditions

    On August 28, in a speech that was more hawkish than many market participants expected, Federal Reserve Chairman Kevin Waller cited a series of indicators showing a strong economic condition, including high corporate profits, stable consumer spending, and narrowing credit spreads. Waller stated, "In my view, the credit and loan markets show almost no signs that monetary policy is becoming restrictive. Overall, I find it difficult to describe the current overall financial conditions as restrictive." This statement boosted Wall Street's bets on a rate hike by the Federal Reserve.

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  • Waller Signals Rate Hike as Fed Focuses on Inflation

    On August 28, Federal Reserve Chairman Waller stated on Friday that if policymakers cannot be confident that inflation is returning to 2% "in a clear and sufficiently rapid manner," the Fed "has work to do." This suggests that if price pressures do not improve, the Fed may consider raising rates in its next move. Waller made it clear that he still supports the Fed's long-standing policy path of managing inflation through interest rate adjustments. This significantly increases the likelihood of a rate hike in the near future, which may put him at odds with President Trump, who has long sought rate cuts. This statement effectively eliminates the ambiguity left previously. At a press conference at the end of July, Waller had refrained from responding extensively to whether a rate hike was necessary to address the inflation issue, which has significantly risen this year and has been above the Fed's target for over five consecutive years.

  • Waller Signals Rate Hike Focused on Inflation

    On August 28, Federal Reserve Chairman Waller stated on Friday that if policymakers cannot be confident that inflation is "declining at a clear and sufficiently rapid pace" back to 2%, the Fed "still has work to do." This suggests that if price pressures do not improve, the Fed may consider raising interest rates next. Waller made it clear that he remains committed to the Fed's long-standing policy of managing inflation through interest rate adjustments. This significantly increases the likelihood of the Fed's next rate hike, which could create a divergence with President Trump, who has long sought rate cuts. This statement essentially eliminated any ambiguity left previously. At the press conference at the end of July, Waller had refrained from responding extensively to whether a rate hike was necessary to address the inflation issue, which has been significantly elevated this year and has exceeded the Fed's target for more than five consecutive years.

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