Prediction markets now assign 64% odds of a Federal Reserve rate increase within a year amid rising Treasury yields and inflation concerns.
Traders on prediction platform Kalshi have raised the probability of a Federal Reserve interest rate hike to 64% by July 2027, up sharply from even odds earlier. A 43% chance of tighter policy is now seen as soon as this year, driven by surging U.S. Treasury yields and persistent inflation fears.
The shift follows a climb in the 30-year Treasury bond yield and concerns over rising oil prices linked to geopolitical tensions. Economists had previously expected rate cuts, but stronger labor data and inflation have dimmed those prospects. Fed officials at the last meeting signaled no imminent cuts.
Kevin Warsh, set to replace Jerome Powell as Fed chair, faces a potential rate hike cycle despite President Trump’s push for cuts. Markets reassessed the outlook as yields hit recent highs, reflecting growing unease over inflation.