According to the CME FedWatch Tool, 63,5 percent of market participants currently expect the Fed to keep its benchmark interest rate unchanged. Just one week ago, nearly 85 percent anticipated a pause in rate moves.
At the same time, 36,5 percent now expect the Fed to raise rates by at least 25 basis points. A week earlier, that share stood at just 15,5 percent.
Such a divided market consensus so close to a Fed meeting—with the decision due on Wednesday evening—is highly unusual. A key question will be how new Fed Chair Kevin Warsh assesses the inflation outlook and the recent surge in oil prices.
Another source of concern is the Personal Consumption Expenditures (PCE) Price Index—the Fed’s preferred inflation gauge—which remains elevated. The PCE index «continues to run well above the Fed’s 2 percent target,» wrote Ed Yardeni, president of Yardeni Research.
Conflicting Inflation Signals
