Construction on the Marriner S. Eccles Federal Reserve building in Washington, DC, US, on Monday, Dec. 15, 2025. <\/p>\n
Al Drago | Bloomberg | Getty Images<\/p>\n
Markets for the first time in the current cycle now think the Federal Reserve<\/a>‘s next move will be an interest rate hike.<\/p>\n Following a week of surprisingly high inflation readings, traders in the fed funds futures market are pricing in an increase as soon as December, with a much higher certainty into the early part of 2027, according to the CME Group’s FedWatch<\/a> tool.<\/p>\n A December hike has a nearly 51% probability, while a move higher by January carries about a 60% probability with March coming in at better than 71%, according to the measure, which uses prices on 30-day federal funds futures contacts to gauge probabilities.<\/p>\n The move comes near the close of a week where both consumer and wholesale inflation<\/a> posted multi-year highs. Import and export prices also were at levels not seen since the last inflation spike, a period that prompted aggressive Fed rate hikes that started with four consecutive moves in three-quarter percentage point increments in 2022.<\/p>\n Former Fed Governor Kevin Warsh<\/a> takes over the helm of the Fed as of Friday<\/a> and has indicated he thinks the central bank actually can lower rates in the current environment. At the last Federal Open Market Committee meeting, three members dissented<\/a> from a vote to hold benchmark rates steady as they objected to language<\/a> hinting that the next move would be a cut.<\/p>\n Economists participating in the Survey of Professional Forecasters think second-quarter inflation<\/a> will top out at 6%, a huge boost from the last estimate, according to a release on Friday.<\/p>\n