Polymarket, a market forecasting firm, has raised its pricing in a 25 basis point rate hike in September to 54%, while interest rate derivatives imply a 63.6% probability. Although there's a difference of about 10 percentage points, the direction is consistent: with resilient employment, rising oil prices pushing up inflation risks, and a hawkish shift in the Fed's stance, a rate hike has moved from a tail risk to a primary trading scenario.
However, a 50% probability doesn't mean the Fed can raise rates "without surprises." The market still maintains a 36%-47% probability of holding rates steady, meaning any decision could trigger a repricing. Friday's inflation data will influence the final judgment, and a Reuters poll showed 70% of economists expecting no rate hike this time, reflecting a lack of consensus between institutional forecasts and trading activity.
