Odds of Federal Reserve rate hike surge as oil prices rip higher
Get the Finance newsletter
Daily finance — markets, central banks, M&A, the prints that move money. Free.
- Fed funds futures price an ~82% chance of a rate hike at the September Fed meeting, up from below 53% a week ago per CME's FedWatch tool; even next week's meeting now carries a ~38% probability of a quarter-point move, up from under 12%.
- Brent crude hit $100 a barrel on Thursday for the first time since late May amid tit-for-tat US-Iran attacks, pushing the US average gasoline price to $4 per gallon — the highest in more than a month, per AAA.
- Initial jobless claims dropped to 187,000 for the week ended July 18, the fewest since 1969 when the US population was 60% of today's, reinforcing the case that the Fed can pivot attention toward inflation.
- The Dow Jones tumbled more than 600 points in midday trading and the Nasdaq Composite shed nearly 3%, as rate-hike expectations compounded pressure from oil's breakout, a 6+ basis-point rise in the 2-year Treasury yield, and Alphabet's post-earnings swoon.
- Kalshi prediction-market traders priced a September quarter-point hike at 48% midday Thursday, up from roughly 30% a week ago, per the article.
- FWDBONDS chief economist Christopher Rupkey said the claims data show "signs of overheating," but questioned how long that lasts if energy prices "continue to spiral upward."
- Despite the shift in market pricing, FactSet's economist consensus still sees no rate hikes this year and a half-point cut in 2027.
Why it matters: Rate-sensitive tech names face a tightening squeeze as the Nasdaq sheds nearly 3% while Fed-hike odds climb — 38% for next week's meeting, 82% for September. With Brent at $100 and jobless claims at their lowest since 1969, the Fed's inflation-versus-labor calculus is being pushed from both sides at once.
