Markets expect first Fed rate hike since July 2023 today

Rate Hike Odds and Precedent

Markets assign a 93% probability that the Federal Reserve will announce its first rate hike since July 2023 today. In data since 2008, when hike expectations reached similar levels, the Fed delivered a hike in every instance.

Potential Outcomes

If the Fed leaves rates unchanged, it would constitute the largest dovish surprise at a scheduled policy meeting since 1994. A hike aligns with current market pricing; a hold would be an atypical shock.

Leadership Context

Fed Chair Warsh, appointed by President Trump months ago with expectations of rate cuts, is now anticipated to initiate a hike as the first change to the Fed Funds Rate under his tenure.