Inflation Nears The 'Red Zone,' Odds Of The Fed Hikes Rise

10Y breakeven inflation is nearing the critical 2.5% 'red line,' a level that could force the Fed to consider rate hikes again, similar to 2022. Federal Funds futures are already pricing an 11% probability of a hike by December and 35% by March. The setup points to higher inflation expectations and a more hawkish policy backdrop, with potential broad market implications.

Analysis

10Y breakeven inflation is nearing the critical 2.5% 'red line,' a level that could force the Fed to consider rate hikes again, similar to 2022. Federal Funds futures are already pricing an 11% probability of a hike by December and 35% by March. The setup points to higher inflation expectations and a more hawkish policy backdrop, with potential broad market implications.