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Markets weigh chances of a Fed surprise hike ahead of Warsh decision

Federal funds futures implied a 40% probability of a hike in the run-up, while traders saw about a 30% chance as of Tuesday afternoon.

Reported · Written up by our desk · Central Banks

LiveMint Markets reports that the Federal Reserve is expected to keep interest rates unchanged on Wednesday, but uncertainty persists over whether Fed Chair Kevin Warsh could signal or support a surprise increase given inflation remains above the Fed’s 2% target.

According to LiveMint Markets, the ambiguity stems from Warsh’s repeated focus on bringing inflation down without offering a clear view on whether raising rates would be needed, amid pressure for policy to stay restrictive for longer as tariff-related price gains and the effects of the Iran war fade.

Ahead of the decision, LiveMint Markets said the probability of a hike priced into federal funds futures reached 40% before the meeting, with investors later seeing about a 35% chance as of Tuesday afternoon, a notably elevated level of uncertainty.

The report also noted market positioning around the event, including S&P 500 futures rising 0.2% and Treasury yields breaking a three-day losing streak on Wednesday as investors awaited the 2 p.m. Washington post-meeting statement and Warsh’s subsequent press conference.

Latest closeS&P 500 7,428.78 ▲0.2%

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