Fateful Return of Rate Hikes
Blake HuberSigns Federal Reserve policy is not restrictive are appearing with increasing frequency. Economic data in the United States has been steadily strengthening after bottoming at the end of 2024. The 4 year rally in equities has continued its upward march, hitting new all time highs almost on a monthly basis.
Federal Reserve2Y TreasuryInflationPCE IndexServices PMIEUJapanUKFed Funds Rate
Summary
- Personal Consumption Expenditures (PCE) Report for August came in higher than all expectations.
- Fed Funds futures market is now pricing in rate hikes at the September Fed meeting.
- The Fed Funds market is pricing in up to 2 additional rate hikes by the end of 2026.
Key Points
- The PCE Inflation Report released in August 2026 showed a 3.7% year-over-year increase, destroying hopes for a continuation of the recent trend of deflationary economic releases.
- The 2-year uptrend in the price of services is still climbing after 4 years, with the Services PMI indicating an accelerating economy.
- The CME Fed Funds rate prediction market shows an exceptionally clear path for higher rates in the US this year, with a 72.8% probability of a rate hike by the October 2026 meeting.
- Rising rates are a global phenomenon. International rates are also rising, with most developed countries in Europe and Australia either tightening again or putting rate cuts on hold.
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