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Markets Tilt Toward Fed Rate Hikes as Inflation Stays Hot

Oil-driven inflation is pushing the Fed toward a tighter stance before the June meeting.

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The Bank of England building in London, Britain, December 1, 2025. REUTERS/Maja Smiejkowska
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Overview

  • Futures pricing now favors a rate increase over a cut as CME FedWatch shows rising hike odds following hotter April inflation reports.
  • Treasury yields jumped, with the 30-year above 5% and the 10-year near 4.5%, which raises costs for mortgages and corporate borrowing even without a Fed move.
  • Kevin Warsh is confirmed as the incoming Fed chair and faces pressure to lay out his approach before his first FOMC meeting on June 16–17.
  • Views are hardening among analysts, with Yardeni Research saying 2026 cuts are off the table and calling for a July hike, while BNP Paribas argues for holding rates unless inflation expectations break out.
  • The Iran war and the choked Strait of Hormuz have pushed energy prices higher, feeding into April CPI at 3.8% and PPI at 6%, and President Trump said cuts may wait until hostilities end.